Case Study:- Transforming a 5 Bedroom House into a Lucrative HMO Investment
Property Overview
| Location | South East England |
| Purchase price | £122,000 |
| Layout | 5 Bedrooms and 1 Lounge |
| Building Work Financials | |
| Deposit Required | £30,500 |
| Money Spent On Building Works | £9,250 |
| Monthly Rents | £575 per room |
| Monthly Income | £2,875 |
| Annual Income | £34,500 |
| Annual Running Costs | £4,600 |
| Annual Mortgage Interest | £7,200 |
| Exit Values | |
| Timescale | 6 weeks |
| Commercial Valuation | £230,000 |
| Profit | £98,750 |
| ROCE | 323% |
Introduction:
This is an example of transforming an ordinary property into a highly profitable House in Multiple Occupation (HMO) investment. Let’s embark on the journey of how this property, located in the South East Of England, underwent a complete transformation, generating substantial income and impressive returns.
The Initial Purchase:
We acquired this mid terraced house for a modest sum of £122,000. The property featured a layout of 5 bedrooms and 1 large lounge, making it a prime candidate for conversion into an HMO. However, the real potential of this investment was yet to be unlocked.
Types Of Work Completed
- New kitchen cupboard doors
- New bathroom
- New locks and security
- New carpet
- Decorating throughout
- Fire proofing and alarms
- External painting
- New central heating
- Plumbing works
- Other works
Unlocking Commercial Valuation:
The transformation began with careful planning and a budget of £9,250 allocated for renovations. The result? A commercial valuation from a surveyor as opposed to a standard BTL valuation that soared to an impressive £230,000. This substantial increase in property value set the stage for an incredibly lucrative investment opportunity.
Maximising Rental Income:
With the property now primed for rental, we capitalised on its layout by renting out the 5 bedrooms individually. Each room commanded a monthly rent of £575, contributing to a robust annual income of £34,500.
Managing Costs:
To ensure profitability, it’s essential to manage expenses effectively. Annual bills for the property amounted to £4,600, and mortgage interest payments stood at £7,200.
Calculating Profit:
With an initial deposit of £30,000, we transformed a tired house attracting no interest when selling into a lucrative HMO investment. Resulting in a healthy profit that continues to grow year after year, along with substantial capital growth this is a valuable HMO investment.
Conclusion:
This shows the potential of HMO investments when executed strategically. With prudent planning, careful renovation, and effective property management, this property has evolved from a simple purchase into a thriving source of income and capital growth. It exemplifies how a well-planned HMO investment can yield impressive financial rewards in the dynamic world of property development.
