What is an All Money Out Deal in Property Investing?

An "All Money Out" deal is a property investment strategy where you aim to recover your initial investment (including the deposit, renovation costs, and fees) by refinancing the property after increasing its value. The goal is to retain the property while getting your original capital back to reinvest in further deals. Essentially, it allows you to build a portfolio with minimal ongoing financial input.

This strategy is often used by experienced investors looking to scale their portfolios quickly while minimizing financial outlay.

How Does an All Money Out Deal Work?

1. Identify a Below-Market-Value (BMV) Property
   Find a property that is priced below its true market value. This might be a distressed property or one in need of refurbishment.

2. Add Value Through Refurbishment
   Renovate the property to increase its value. This could include cosmetic updates, adding a bedroom, or modernizing kitchens and bathrooms. The aim is to create a significant uplift in value.

3. Refinance the Property
   Once the property has been refurbished, get it revalued by a lender. If the new valuation is significantly higher than the purchase and renovation costs, you can refinance the property at its new value, releasing equity.

4. Recover Your Initial Investment
   Use the funds released from the refinance to repay your initial investment. Ideally, this includes the deposit, renovation costs, and any additional expenses.

5. Retain the Property for Rental Income
   Keep the property as part of your portfolio, generating monthly rental income while maintaining the long-term potential for capital growth.

How to Do an All Money Out Deal in the Most Risk-Free and Efficient Way

To ensure your All Money Out deal is both profitable and low-risk, follow these steps:

1. Do Thorough Due Diligence

• Research the local property market to identify areas with strong rental demand and potential for capital growth.
• Assess comparable property values to ensure the uplift you’re targeting is realistic.

2. Calculate the Numbers Carefully

• Use the 70% Rule: Only spend 70% of the After-Repair Value (ARV) on purchasing and renovating the property.
• Include all costs, such as solicitor fees, stamp duty, renovation expenses, and finance costs, to ensure you don’t exceed your budget.

3. Secure the Right Finance

• Use a bridging loan or cash to purchase the property initially, as this can allow for faster acquisition and renovation.
• Once the refurbishment is complete, refinance with a buy-to-let mortgage at the higher valuation.

4. Choose Properties with High ROI Potential

• Focus on properties that offer a significant uplift in value after refurbishment.
• Target homes with features that allow for easy upgrades, such as adding a bedroom or converting unused spaces.

5. Work with Reliable Professionals

• Build a team of experienced tradespeople, mortgage brokers, and solicitors to streamline the process and avoid delays or hidden costs.

6. Plan for Contingencies

• Keep a buffer in your budget for unexpected costs, such as higher refurbishment expenses or delays.
• Have an exit strategy in case the refinance doesn’t yield the expected results (e.g., sell the property instead of refinancing).

Benefits of an All Money Out Deal

1. Recycle Your Capital

   • This strategy allows you to reinvest your initial funds into additional properties, enabling you to scale your portfolio quickly without needing large amounts of cash for each deal.

2. Generate Long-Term Income

   • Once the property is rented out, you benefit from a consistent rental income while holding onto the property for future capital growth.

3. Leverage

   • By refinancing, you can leverage the increased value of your property, using other people’s money (via the lender) to grow your portfolio.

4. Tax Efficiency

   • Refinanced funds are not considered income and are therefore not subject to income tax.

5. Wealth Building

   • Over time, property values tend to appreciate, allowing you to build equity and long-term wealth while earning rental income.

Potential Risks and How to Mitigate Them

1. Overestimating the After-Repair Value (ARV):

   • Avoid this by conducting thorough market research and seeking advice from local estate agents or surveyors.

2. Underestimating Renovation Costs:

   • Always get multiple quotes from contractors and include a contingency budget.

3. Market Volatility:

   • Choose areas with stable demand and avoid over-leveraging to protect against market fluctuations.

4. Difficulty Refinancing:

   • Work with a mortgage broker to find lenders who understand this strategy and are willing to refinance based on the new valuation.

By following these steps, you can turn an All Money Out deal into a low-risk, high-reward strategy, enabling you to build a scalable and sustainable property portfolio. This approach is a powerful way to maximize your investment potential and create long-term financial security.