HMO of the Week #1

3 to 6 Bed HMO Conversion

Location: Kirby Liverpool, L5



HMO Project Summary

A stressful 3-month negotiation and a down valuation, we finally manage to get this one over the line, refurbed and filled. Then we refinanced within 10 months.

HMO Purchase

Purchase £
Purchase Price£300,000
Purchase Costs (stamp, legal, survey)£10,000
Purchase MethodMortgage
Loan to Value75%
Loan£225,000
Purchase Capital Employed£85,000
Purchase DateJanuary 2019
Acquisition MethodAgent

A stressful experience where the vendor pulled out and then want back in again. Then we had a down valuation

HMO Planning

12
Planning Use Class BeforeC3
Planning Use Class AfterC4
Planning Period4 Months
Planning Acceptance Date2.Jan.2019

A relatively smooth planning process taking only 4 Months from start to finish

HMO Refurbishment

12
Refurb Time Frame6 Months
Bathrooms2000
Kitchens3000
Refurb Line 1£3,000
Refurb Line 2£3,000
Refurb Line 3£3,000
Refurb Line 4£3,000
Refurb Line 5£3,000
Refurb Line 6£3,000
Total Refurb Cost£4000

A 6-month slog which including putting in some steel beams to the rear to allow for the 6m rear extension under Permitted Development.

HMO Licensing

12
Type of LicensingMandatory
Licensed # Units10
Licensed # Occupants15

Having HMOs in the area already the HMO licensing process was smooth and straight forward.

Lettings

We used our local lettings agent XYZ agent, SpareRoom and RoomGO to get this filled fast. Was filled approx 2 weeks before completion of the refurbishment.

Management

XYZ management Ltd

Software

we used xyz magaement software and ksjhd kjhdf kdjh kjdf

Refinance

12
Total Costs£253,000
End Value (GDV)£400,000
Value Increase£20,000
Remortgage LTV75%
ReMortgage Amount£300,000
Time To Remortgage6 Month
Capital Left In£0

Cashflow

12
Gross Rent4000
Voids @5%200
Bills600
Management500
Maintenance200
Net Rent2700
Mortgage1000
Gross Profit1700
Gross Yield13.71%
Net Yield9.26%
Annual Gross Profit20400
ROOCE %Infinite
ROCE %23.31%

Best Learnings

  • Always work with the builder now against them 🙂
  • don’t underestimate timeframes of getting stuff done

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About the Blog Post Author

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Rupert Wallace

property entrepreneur developing digital & tangible real estate assets