BTL · Property AnalysisA pragmatic BTL and BRRR analysis of a 2-bedroom leasehold flat in Birmingham, B23, with a guide price of £58,000. The property requires cosmetic refurbishment and presents significant potential for rent and value uplift.
The gross yield of 28.97% on the purchase price is exceptional, driven by the low acquisition cost. Post-refurbishment, the target rent of £1,400 pcm (£16,800 pa) is justified by local rental data showing comparable 2-bed flats achieving up to £472/week (£2,045 pcm). After deducting service charge, maintenance, insurance, and agent fees, the Net Rent is £11,690. With a total capital employed of £71,000 (purchase + refurb), this yields an outstanding Return on Capital Employed (ROCE) of 16.5%, demonstrating strong profit generation potential.
The property is projected to generate a positive monthly cash flow of £318 after accounting for mortgage interest, service charges, letting agent fees, maintenance/void allowance, and insurance. This positive cash flow is sustainable and provides a reliable income stream post-renovation.
The primary growth driver is forced appreciation, with an estimated After Refurbishment Value (ARV) of £175,000, representing a significant paper gain of £104,000 over total investment costs (£71,000). While organic growth in B23 is steady, flats typically appreciate slower than houses. The long lease and favourable location support long-term value, but the service charge impacts overall investment performance compared to a freehold property.
Analysis based on a BTL mortgage post-refurbishment, assuming a 75% Loan-to-Value (LTV) on the ARV.
Lender Stress Test: PASS
At a stressed rate of 7.0% (125% coverage requirement), the required rent is £963 pcm. The projected rent of £1,400 pcm provides 145% coverage, comfortably passing the stress test. Availability of 75% LTV on leasehold flats via auction is a key diligence point.
Demand for well-presented 2-bedroom flats in B23 remains strong, driven by proximity to transport links and amenities. The target tenant profile includes young professionals and couples seeking affordable, modern accommodation.
The property offers multiple viable exit strategies, maximising investor flexibility.
The property is a leasehold flat requiring a mid-range cosmetic refurbishment to unlock its full rental and sales potential. Current finishes are dated and below average.
Add Bedroom Potential: Not applicable. As a purpose-built flat, adding another bedroom is structurally unfeasible and would not provide a positive return on investment. The current layout is standard for a 2-bed flat.
Medium-High Risk. Key risks include securing finance on a leasehold flat purchased via auction, the significant ongoing service charge (£1,550 p.a.), and the need to manage the sitting tenant situation. The success of the BRRR strategy hinges on achieving the projected ARV and rental income, and the availability of BTL finance at favourable terms. The auction process requires diligent and swift due diligence.
Kitchen Base & Wall Units - Cost: £1,500
Kitchen Worktops & Splashback - Cost: £300
Kitchen Sink & Tap - Cost: £150
Oven & Hob - Cost: £400
Extractor Hood - Cost: £100
Bathroom Suite (Bath, WC, Basin) - Cost: £700
Shower Mixer & Screen - Cost: £150
Bathroom Wall & Floor Tiles - Cost: £600
LVT Flooring (Hall, Kitchen, Bathroom) - Cost: £400
Carpet & Underlay (Living Room, Bedrooms) - Cost: £600
Emulsion Paint (Walls & Ceilings) - Cost: £200
Primer & Undercoat - Cost: £100
Satinwood Paint (Woodwork) - Cost: £100
New Internal Doors & Handles (x3) - Cost: £300
LED Downlights (x6) - Cost: £180
New Sockets & Switches - Cost: £100
Full Property Strip Out - Cost: £500
Kitchen Installation - Cost: £800
Bathroom Installation & Tiling - Cost: £1,000
Plastering (Patching & Repairs) - Cost: £600
First Fix Electrical (Sockets, Wiring) - Cost: £1,000
Second Fix Electrical (Lights, Switches) - Cost: £400
First Fix Plumbing (Shower, Waste) - Cost: £200
Second Fix Plumbing (Taps, Connectors) - Cost: £300
Flooring Installation - Cost: £500
Full Interior Painting - Cost: £1,000
Hang & Fit New Doors - Cost: £300
Waste Removal / Skip Hire - Cost: £300
Professional Cleaning - Cost: £200
Electrical Inspection Certificate - Cost: £150
Project Management & Supervision - Cost: £500
Total Estimated Duration: 8 Weeks || 2 Months
Proceed with Caution. This leasehold flat, purchased via modern auction at £58,000, offers exceptional potential yield (ROCE 16.5%) and cash flow (£318pcm) after a £13k refurbishment. Key risks include securing BTL finance, managing a high service charge (£1550 p.a.), and the implications of the sitting tenant. If these can be managed, it's a strong BTL acquisition.
Lakeside Walk presents a compelling, albeit high-risk, Buy-to-Let (BTL) and BRRR (Buy, Refurbish, Rent, Refinance) opportunity. The guide price of £58,000 for a 2-bedroom leasehold flat in B23, Birmingham, is extremely attractive, especially considering the potential to achieve £1,400 pcm post-refurbishment. The projected ROCE of 16.5% and a monthly cash flow of £318 underscore the financial upside. Forced appreciation is significant, with an ARV of £175,000 offering substantial equity gain over the total investment of £71,000.
However, this deal requires careful risk management. The property is leasehold with a substantial annual service charge of £1,550, which significantly impacts net returns. The current tenant is paying only £600 pcm, necessitating either negotiation for their departure (incurring costs) or acceptance of a lower initial yield if they remain. Securing BTL finance, particularly at 75% LTV on a leasehold flat acquired via auction, will require thorough lender due diligence and may necessitate a larger deposit than initially budgeted. The auction process itself demands swift decision-making and execution.
The refurbishment plan focuses on essential cosmetic upgrades—kitchen, bathroom, flooring, and decoration—estimated at £13,000. This investment is crucial for achieving the target market rent and ARV. The long lease term (957 years) and £0 ground rent are highly favourable aspects that mitigate some of the risks associated with leasehold properties.
Recommendation: Proceed, but with extreme diligence. Prioritise confirming mortgage eligibility at the desired LTV, finalising arrangements regarding the sitting tenant, and thoroughly vetting the service charge history and building management. If these conditions are met, this property offers exceptional returns and is a strategic acquisition for an investor comfortable navigating auction complexities and leasehold management.