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I am looking for views on whether I should embark on an HMO conversion. I own some single lets mainly terraced properties at 75% LTV I can make 14%-15% net ROI. I am now looking at quitting my job or reducing my hours at work. I am looking at HMO purely for the extra cash flow.
I have seen properties that I could purchase for £120k-150k which I could convert to 5 bed all ensuite rooms; the conversion cost would be around 60k-70k. To fund these deals, I can go in with cash and then try to secure longer-term funding post refurb and try to pull my money out (I know I will still have to leave a fair chunk in the deal).The rooms would achieve around £425-£450 PCM incl of bills.As I have the cash what are the options people recommend, do I bridge the purchase and then carry out the refurb, or should I use my money to purchase and then refurb which would not leave me much contingency? Or do I avoid HMOs due to the constant legislation changes and carry on with adding more single lets which get me a solid 8% yield and £275-£300 net cash flow per month.
I hope this makes sense and I would love to get views from more experienced investors on what would be my best options.Thanks
Hi Mez,Shawbrook Bank have a bridging product for refurbishment of HMOs, then reverting to term finance. The team at Property Tribes Financial Services on 01206 654444 would be able to guide you on the features of this product and also others that are available that may suit you.Just a word of caution - putting en-suites in all rooms may open you up to individual council tax banding, meaning each room would be individually banded. This would make a big difference to your figures.Have you thought about looking at the co-living strategy - creating hi-quality homes with more communal living space and amenities?
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**
Really impressive video and all the amenities offered.
How much rent do the young people pay per week?
Dont let the additional legislation put you off hmos. Just make sure you lower your risk by buying in a good area
"I own some single lets mainly terraced properties at 75% LTV I can make 14%-15% net ROI"
Where are these dream properties?!
I really struggle to find 15% ROI
Likewise - this would be useful to know.
You have a few options there and looks like you have thought of each one carefully. Its great getting other opinions and insights but always do what is best for you. You are a successful landlord and investor already so trust in your own judgement.
Also, the video Vanessa has shared with Phillip Moore is a great watch, I thoroughly enjoyed it.
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