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We’re doing a weekly Vlog for our latest HMO project in Crawley, Gatwick. It may be of interest/value to some people so I thought I’d post it in the community as we've always had a lot of people interested in our previous projects when we've posted. This time, we’ll be able to take you through the whole process from start to finish and in as much detail as possible.
Feel free to ask any questions etc.
Here is the first week:
Hi Guys,Thank you for starting this vlog series. I think it's a fantastic community resource.First of all, what a cracking house - so much potential.I think you are very brave taking on such a big project. How do you deal with that fear, or do you not really feel the immensity of what you have taken on?The property looks like it is a lovely family home. Do you have any qualms about chopping it up into an HMO?Is it important to you that it could easily be turned back into a family home? Will you endeavour to keep that kind of feel, or is it very much an HMO in your minds?Could you share the numbers - what you paid, how much you are spending on the conversion?What rental income do you estimate from the 5 bedrooms?Very best of luck and will look forward to future instalments!
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
Yes, we’re hoping it will be useful to some people as communities like this have given us so much over the years, it’s nice to be able to ‘give back’ finally!
In answer to your first question, this property is in the next road to our other 5 bed HMO and the layouts are nearly identical! So, in terms of what we’re doing with this property, it is pretty much exactly the same as our previous project so we feel extremely confident with it. We’re also expecting to achieve the same figures, which I will share in a moment.
Funnily enough, our first ever investment property is a 3-bed family home which recently we had to find new tenants as the tenants we had of 2 and a half years gave notice as they needed another bedroom due to a growing family. We actually had a void of 8 days and there was hardly any interest in it, to our surprise! We have now filled it with 4 professionals who are friends on the same AST. We were thinking of selling it but we like the thought of having a family home but there just didn’t seem to be the demand? So, in answer to your question, we feel that if the market is currently professionals looking for housing and we can provide them with exactly what they want, then this is a good business decision. What with everything going on in the property world at the moment, family homes are unfortunately not producing good returns, at least where we are. We have to adapt to the ‘external environment’ and this, some would argue, is an unfortunate consequence of the changes the government have made.
This house is actually for a client and is their property. After seeing our previous projects, they decided they wanted to do exactly what we had done and so I can’t really answer that question on their behalf? However, our personal opinion and company ethos is that we will provide not only beautiful homes but ones that really think about the people who will live there and how they will live. Thus, an awful lot goes into the infrastructure of the house to make tenants lives easier and minimise the usual issues you’d expect in an HMO. One such example is that we put sound insulation into all walls, internal and walls connected to neighbours, to minimise disturbance as much as possible. Therefore, we are happy going forward in the knowledge that they are very much HMOs in our minds, as we strive to create a product that not only looks good but actually works. Of course, there would be a cost to turn them back into a family home, however, with this project and our previous one, the cost wouldn’t be substantial in our opinion. We will look to diversify our portfolio moving forward and will not continue to have all HMOs as this is, of course, risky.
Onto the figures, I see Pete has asked down below so I will share them on his comment if you don’t mind ?
Thank you for creating such a fantastic platform and looking forward to sharing the project as the weeks go on.
I assume with Gatwick airport the demand for HMO rooms in Crawley is quite high?
Is that the type of tenant you are targetting?
This is Angela Bryants area, I'm sure she's got some comments to make on this.
As Vanessa commented, the numbers would be very interesting.
In the last year of operating our HMOs, every time we finished a HMO (we have done two) and every time we have had a room become available (a total of 4 times) we have always filled the rooms quickly and to no voids. So, I believe the demand is high, although I have seen the number of HMOs available increase and we have had people view and then turn the rooms down due to cost (too expensive for them) or the rooms weren’t big enough/enough storage space. But you can’t please everyone.
The type of tenants we have are air craft engineers, pilots and general professionals.
Someone has mentioned Angela Bryant to me before but we’ve not actually met her. Is always good to get to know other local landlords.
I will share the numbers below ? Thank you for your comment.
Awesome video, especially the one you already done up:
so, i am wondering about the numbers as well, how does it stack up (if at all?) Sorry for being a bit nosy, but these properties going for at least 250k, roughly 200k mortgage on 4% = 650/m
The specs are just to die for (metal plate switches?) really high end finish, this reno must have costed an other 70k? if not more?
Rental in the area is 500/room, so 2500/m for 5 rooms, now 650 is mortgage, 650 is utilities (optimistic, ins, ctax, internet, etc), you have 1200 as profit, so the 70k reno would pay for itself in 5 years? (prob more considering tax and all else) if I add the deposit, its even worse.
Yeah, would love to hear the numbers as for me it does not stack up with only 5 rooms and with this high spec (what is amazing, seriously, great job from every angle, except the finances)
Happy to be corrected here, and I mean it!
Thank you very much, this video is how this current project will end up (pretty much) but with slight changes to the décor etc. so as to not be completely identical.
You’re not being nosy at all, happy to share!
I think I will show you both sets of figures, one which is our figures from the video/project above and two, for this project, as they are slightly different due to our client wanting to purchase the property in cash.
Purchased as a 3-bed terraced house.
PP: £210,000 cash purchase
Approx. Refurbishment costs: £70,000 (we painted and saved other costs by doing some work ourselves)
Other costs: £10,000
Total Costs: £290,000
Projected re-mortgage valuation: £280,000 (we are currently refinancing our 6 bed 6 ensuite HMO before refinancing this one, so I will share the figures with the community once this has happened).
Projected money out: £210,000 @75% LTV
Projected money left in: £80,000
Gross Monthly Rental Income: £3,220
Projected Monthly Expenses: £1,645.86 (this figure factors in voids, maintenance costs etc.)
Cash flow (profit) per month: £1,574.14
(Note: this is with a mortgage rate of just over 3%. With a mortgage at 5%, this would produce a return of 18.26%, which we would still be happy with)
This new project’s figures, bearing in mind this is to remain a cash purchase (as our client wishes):
PP: £247,500 cash purchase
Approx. Refurbishment costs: £81,000 (slightly higher as there is a bit more work to be done and painting costs etc. included this time)
Total Costs: £338,500
Projected Monthly Costs (inc. Voids and insurance): £678.77
Maintenance and Safety tests: £62.50
12% Management fee: £386.40
Total costs: £1,127.67
Cash flow (profit) per month: £2,092.33
Annual profit: £25,107.96
Hopefully this answers your question. The room rents we are getting/projecting for this property are: £700 (although this room can have a couple so it could be £750-800), £650, £650, £620 & £600 pcm. So, you can see from your figures that is an increase of £720 pm which does add up.
Thank you for your post and comments, we really appreciate it! Hope this gives you a much better insight.
Brilliant, Thanks much for the detailed reply!
Keep up the good work guys, look forward to see the other videos!
Again i'd be interested in the financials and also how do you usually find your tenants?
Please see my reply to Pete above regarding the figures.
We always find our tenants through SpareRoom. We opened our own HMO specific Lettings agency so we do all our own lettings etc.
Many thanks for your comment
One thing I forgot to ask, how do you guys work with councils regarding planning? architects? or you only needed to do it once and just doing the very same reno every time?
still takes time to apply for consents?