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Happy New Year everyone! We ended the year by finishing our 6 bed, 6 bathroom HMO in Crawley. We managed to get it fully tenanted in December and, due to the high standard of refurb, we managed to raise the local highest room price by £100 and cashflow is £2,280 per month! We are so happy to finally get this one past the post as we can now focus on our next HMO project which has works starting on 9th January.
Below are the figures (as you can see we are waiting for a revaluation to finalise these):
Purchased as a 4 bed end-terraced house.
PP: £286,000Approx Refurbishment costs: £135,000Other costs: £5,800
Total Costs: £426,800
Projected re-mortgage valuation: £420,000Projected money out: £88,400Projected money left in: £138,200
Gross Monthly Rental Income: £4,200Projected Monthly Expenses: £1,920Cash flow (profit) per month: £2,280
So what makes this a unique HMO?
1 - Solar panels were installed before a tariff increase meaning that after a pay back period of 6 years, the property will generate a further source of tax free income.2 - Air source heat pump installed for very efficient heating, also on a tariff which will result in the pump ‘paying for itself’ due to payments.3 - Double extensions built for increased space to allow 6 bathrooms. The increased space creates increased income of £950 per month due to additional ensuite bedroom and the creation of 2 further ensuites. This means the extensions will have been paid for in 4.39 years through this increased income. £50,000 (cost of extension) / £11,400 (£950 x 12) = 4.39.4 - Property completely gutted and internal layout redesigned for our needs. Noise and thermal insulation installed in all internal and external wall cavities.5 - Each room has its own ethernet ports for wired internet access, TV points & USB plug sockets.6 - Keyless locks for each of the bedrooms.7 - Security & Fire safety has been above the minimum requirements. Mains connected fire alarms in all rooms along with fire doors with intumescent strips; heat alarm in kitchen; thumb locks on all external exit points.8 - High quality finish as every last detail has been thought of and been designed cleverly to give the impression of luxury without inflating costs.
Our extensive refurb gave us the opportunity to really create a product that was well-tailored to its function and future proof the property by being the only accommodation of its type in our area, thus servicing a new target market, as evidenced by a number of our tenants saying they had never considered a house share till coming across our property.
If you’ve made it this far, thank you so much for reading our post. Happy to answer any questions.
Oli and Alicia
Hi Oli and Alicia,Welcome to the tribe and thank you for posting such detailed information.This looks like such a great project and finish, I felt like renting one of the rooms myself. The house is a credit to you and your hard work.We are not too far from you - based in Guildford - so perhaps we could arrange to interview you for PT TV to find out more about your property journey?All the best for 2017!
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**
Thank you for the warm welcome and for taking the time to have a look at it and comment.
Unfortunately, all the rooms have been taken now but we will be sure to let you know when one becomes available
Wow that would be amazing, we would love to share our journey so far. Alicia's brother currently goes to uni in Guildford so we could make a day of it - let us know when would be a good date and we will coordinate our diaries
Oli & Alicia
Great news at what you have achieved with what should be the ideal standard for every LL
Then perhaps we can shut the LL haters up.
Clearly you have provisioned an excellent offer
My query relates to your opinion on how your profitability might be affected by individual council tax possibly converting to business rates with room size below 6.52sqm being enforced.
Would that have affected your obvious substantial investment and possibly put you off were that the prevailing situation!?
Thank you for your comments.
We made sure that all our rooms exceeded the minimum room sizes during the initial planning of the layouts. Council Tax liability could be a consideration in the future but I suppose businesses, as ever, have to adapt their business model as and when changes occur. There is obviously a demand for this type of accommodation and with compulsory licensing coming in we hope we have future proofed sufficiently. Crawley doesn't currently have an official HMO officer, however, we did have a chat with a relevant person in the council who told us that Crawley do not plan to change licensing in Crawley for the foreseeable future, therefore, we do not believe we will be affected by this any time soon.
The landlord world is full of challenges at the moment - we are all having to adapt to the changing landscape. For the short time we have been in the industry (since 2014), so much has already changed - I guess if you didn't think positively and always worried about the "what if's" you wouldn't do anything.
But to answer your question, I believe if the numbers were still healthy we would have still gone ahead and done the same thing. We have made it our company mission to provide truly beautiful homes, that take the safety of our tenants seriously and yet still create a healthy investment. We aim to raise the standard of rental accommodation in our area and would actually welcome other landlords following in our footsteps as, like you said, there are plenty of landlords who just provide the minimum. We believe that you can profit from a win win situation where you provide a decent product and management service and tenants are happy to pay the rents you charge as they see the value you provide.
I hope this answers your question.
Just saw this thread mentioned in another topic today. This issue is frequently raised and it is a risk. Many councils have a policy of not banding HMO rooms, however, due to impact on supply of entry level rental accomodation. However, even with basic banding this investment would stack up more favourably than a standard BTL investment. Also, the laws of economics are such that supply may decrease if a change puts off new entrants. Therefore in the medium to longer term it may correct itself to some extent in the market rent. In the worse case scenario this property will still yield well and be less hassle than managing six low value individual studios scattered about town or in less desirable locations for example.
Rural Practice Chartered Surveyor. Experienced in estate management, residential investments, planning and development and rights for utility apparatus. All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.
Wow what a refurb! I really do hope the tenants treat it with respect. I assume you're looking at professionals for this?I must admit I'd be scared of leaving tenants in that high spec a property. Those kitchen worktops for example look expensive.
Best of luck with it and thanks for posting up the pictures.
I would suggest that rather than an HMO it is a sort of mini boutique hotel with hotel type accommodation standards.
I don't believe though your average HMO tenant could afford this obvious level of luxury
But then the market this particular HMO is aimed at is definitely higher end.
This is reflected by the considerable investment that has been expended on achieving such s fabulous outcome
Not many HMO LL could afford this level of investment.
Having said that I doubt this LL will ever experience a void again with this particular property!!
This example of what LL are doing to invest in tenant comfort should be seen in the national press.
It will prove to the LL haters that LL are motivated to provide a quality product and all they want is the rent to be paid and if not for the tenant to vacate without the LL having to evict them
A very simple and what should be an agreeable situation!
Rent averages only £88 weekly per room
Correction gross rent av £161 weekly/£700 pcm
Yes they are all professionals, many work at the airport.
I wouldn't say that we are more wary than any other landlord is leaving tenants in a property as many of the materials we have used have been fairly economical but used cleverly to give the impression of a high spec. For example, in the bathrooms we used a cheaper tile to cover the majority of the area and then put a more expensive tile to use as the detailing. The kitchen worktops are a really nice laminate and cost, off the top of my head, approximately £300 so wasn't that expensive really. If put time and effort into the design it can look great and not cost the earth
Thank you and good luck with your endeavours too.