This property literally found me and when you’re sending out all the landlord letters you pretty much have to answer any call that comes through despite having a suspicion that its possibly a PPI call.
However, on this occasion I was sat in my office when the phone rang it was someone contacting me to ask if I would be interested in a property in Nottingham, it was in an area that I knew well. The sourcer dulled the deal down saying that no one wanted it as the RICs homebuyers report he had done said the property needed a lot of work, to the tune of around £35,000 but, he said that the vendor just wanted it gone and was happy to let it go for £97,000 the price she paid around 2005.
Now, most RIC’s homebuyers reports that add costs for the remedial works over exaggerate, so after seeing the homebuyers and knowing what the vendor wanted I knew there was a deal here. Houses of that type and size sold for £125,000 in bad condition through auction (although most houses go for more at the auction but that’s a different blog post I think)
Things got interesting in the viewing. Because of the survey I had a preconceived idea of the condition of the house (a bomb site) but when I got there it was in great condition, the main issue was that the oven door was hanging off and the “rotten floorboards” translated into a semi bouncy floor in the entrance hallway of the house.
The interesting thing to take note of was the fact that 4 people where living there, there were locks on the doors, the living room had a bed in it there were fire doors throughout as well as fire extinguishers in the hallways.
This property is in an Article 4 area, so picking up a large Victorian terrace with planning is difficult and expensive. In fact, one sold a few weeks ago for £160,000 on the road parallel. I had gone to the viewing with an idea of what I could do with the property, but that plan had drastically changed. After speaking directly with the vendor, I found out that the property was an old HMO, she had lived in it as a student and when she moved back to London, she had left it in the hands of a local agent whom were mismanaging it.
I explained to the vendor that I would be happy to pay the £97,000 for the property as it stood, but I made a secondary offer, that offer was £100,000 if she could provide me with all of the previous tenancy information and allow me the 12 weeks to apply to the council for grandfather rights so that the property could be used as an HMO.
She agreed to the latter and I filled and submitted the forms with the local council for the established use on the property, I’ve found when doing this that providing the ASTs from 1 year before article 4 came in as well as a spreadsheet showing the occupancy of the property that correlates directly with the AST’s, of course, you need to submit a 1:1250 site plan with the property highlighted and a cover letter. Unlike normal change of uses, the planning department does not deal with these applications the solicitors within the council do.
Within 12 weeks we had the planning doc in hand and I began the purchase of the property. I turned the property from a 4 bed 1 bath to a 6 bed 3 bath 2 of which are en suites. you may wonder how we did that with a standard victorian terrace, below are the plans.
Because the property wasn’t in the worst state, we managed to get the renovation done cheaply. It was refinanced for £185,000 at 80% LTV meaning after all costs we left just over of £4000 in the deal. The NET rent on this one brings in around £1400PCM so the ROI is fantastic.
Not bad for a property that several investors passed on, for me the key learning of this deal is to never to write the deal off on other people’s opinions, if the vendor is motivated enough you can always come to a win/win deal and of course if you don’t ask, you don’t get.
Purchase price: £100,000
Buying costs: £7650
Finance costs: £4375
Cash in: £152,025
End val: £185,000
Cash left in: £4025
Gross rent pm: £2460
Net rent pm: £1561
Resource: JMI Holdings