Sub Heading The Live Collective Team have been hard at work this Jan – March developing one of our new House2HMO deals; here’s the details:
Our clients are hard – working, busy, professional parents with a small property portfolio of single lets and holiday homes. With savings in the bank they wanted to invest their money in a property project that could net them a higher rental return than their current portfolio.
Already well versed in how property can work as a secondary income they were very interested in working with us on our new House2HMO product offering. Knowing the long-term goal of your investor or client is vital to the success of a property project like this and both wanted to have enough financial freedom to reduce their working hours in the medium- long term future. They also wanted to benefit from high cashflow returns that a correctly sourced and run HMO can deliver.
Our House2HMO product offers three levels of support: Sourcing, Set Up and Service, all of which you can pick and choose from to decide what suits. Our client being super- busy professional parents, wanted the full service.
A House2HMO project requires a lot of time to put together as location, house layout, local demand and building to HMO standards takes time. It’s very different to purchasing a standard buy to let. Realistic time frames to expect are: 3 months to source, 3 months to buy, 3 months to refurbish and 1-2 months to fill and this is only if there are no delays or complications involved in the buying or refurbing process.
Using our extensive knowledge of the locality and the suitable properties required, we looked for a town with high rental demand, lots of business parks, hospitals and a healthy flow of working professionals. The supply and stock of available rooms in the area we selected were very tired, and we could see an opportunity for a high-end HMO portfolio to be built in the area.
The perfect HMO format that works locally and provides the best return is 6 rooms (planning is not required for a 6 bed HMO as it is treated as permitted development by the local planning department).
The final house selected was a 4-bed house, it fitted perfectly with our House2HMO blueprint. It was a tired property that needed a full refurb; new kitchen, bathrooms, boiler, walls moving to increase room sizes and garage to convert, all within permitted development. There were no other HMO’s on the same street, the drive had lots of space for multiple cars to park and unrestricted road side parking
The house was purchased for £375K, £25K below asking price which is good for this area where sales are strong. The total cost to the client for everything from deposit, sourcing, legal, stamp duty and mortgage fees, HMO licensing, refurb, & furnishing came in around £180K
Given this was a long -term investment for the family, once fully let, the house will deliver approx. £3,400 in monthly rental, that’s £40, 800 per annum with servicing costs of approximately £2,200 per month or £26,400 per annum, inclusive of full management fees.
This provides them a net income of 8% per annum on their original investment, not to mention the increase in value from the refurbishment, estimated to be around £65,000 – £75,000 plus the capital appreciation. It is expected that through both the increase in value of the house, coupled with 3 – 4 years of capital growth and rental returns, that our client will see their original invested capital returned. Not bad for a long-term investment plan and significantly better than traditional buy to let returns.