5 Bed Social Housing HMO conversion
Project:
Background & Deal Structure:
A 3-bedroom terraced property ideally suited for conversion into a 5 bedroom house of multiple occupancy (HMO) in Wigan.
The Registered Provider (RP) has expressed interest in this property, and it has passed their postcode checks.
Area / Location
Located close to the centre of town, with an abundance of local amenities and facilities, a short distance to the train station and motorway networks providing access to Preston, Manchester and beyond, Wigan is well located.
The property is perfectly positioned for access into the town, is in close proximity to many local, national and global employers, and benefits from a variety of local recreation spots including local golf courses, parks and forests.
Scope of Work
The property has been recently refurbished, with the kitchen and flooring in good condition. However, carpets are needed throughout the house, and further work is required to bring it up to standard, particularly for HMO use.
- Flooring
Install carpets in all rooms to complete the refurbishment. - Heating and Glazing
Confirm functionality and safety of the gas central heating system.
Ensure the 20mm double glazing is intact and meets insulation standards. - Garage
Clear out the garage of all items to prepare it for potential future use. - Garden
Conduct a thorough garden tidy-up, ensuring the area is presentable and low-maintenance. - Electrics
Upgrade and certify electrical wiring to meet HMO standards, aligning with an EPC rating of at least D. - Internal Doors
Replace or install fire-rated internal doors to comply with HMO fire safety regulations.
Ensure door casings are secure and meet required specifications. - Structural Work
o Ground Floor:
Install a 4m stud walls to divide the current lounge and create bedrooms 4 and 5, with an ensuite bathroom.
Extending the kitchen to the left side.
o First Floor:
Divide existing rooms to create bedrooms sized at least 7m² each.
Add a second bathroom to accommodate HMO requirements for Wigan Council. - Decoration
Carry out decoration throughout the property, including painting walls, ceilings, and skirting boards, ensuring a clean and modern finish.
Video Walkthrough:
Financials:
Acquisition Costs
| Purchase Price Sale agreed | £140,000 |
| Renovation Refurbishment & Conversion Costs | £45,000 |
| Architect/Planning Budget for plans drafting plans and submission to local authority | £700 |
| Building Control Estimated cost for compliance inspections & sign-off | £700 |
| Furniture Furnishing to provider’s requirements | £3,600 |
| SDLT Stamp Duty Land Tax | £7,000 UK £9,800 INT |
| Survey Chartered surveyor onsite inspection and report | £600 |
| Legals Conveyancing & transaction fees & disbursements | £2,500 |
| Insurance Buildings insurance to cover the reinstatement value | £550 |
| Sourcing Sourcing Fee | £8,750 |
| Capital In Total acquisition costs | £209,400 |
Optional Extras
| Project Management Coordinating contract teams | £4,500 |
| Lease Setup Lease negotiations & contract with Registered Provider | £1,400 |
Post Works Refinance
| Gross Development Value Bricks & mortar valuation | £150,000 |
| Uplift Between GDV and original purchase price | £10,000 |
| 1st Charge Lending @75.00% of GDV – recycling funds onto next opportunity | £112,500 |
| Capital Left In Capital remaining in equity post-refinance using mortgage lending | £96,900 |
Rental Income
| Gross Rent p.a. Negotiated rate for area | £24,700 |
| Mortgage p.a. @6.00% lending @75%LTV | £6,750 |
| Operational Expenses p.a. @0.00% | £0 |
| Management p.a. @0.00% | £0 |
| Net Cash Flow p.a. Pre-tax income | £17,950 |
Capital Growth
Capital Gain
| Capital Value @ Year 10 Year 10 value assumed conservative 3.5% annual growth | £211,590 |
| Mortgage Lending 1st Charge lending redemption | £112,500 |
| Equity Investment Capital Capital returned to equity investor | £96,900 |
| Capital Gain @ Year 10 Cap.value less 1st charge lending & equity investor’s capital | £2,190 |
Investor Return
Income & Return
| Net Cash Flow PA Annual net income after costs | £17,950 |
| Total Net Lifetime Cash Flow Net income over life of lease term | £179,500 |
| Total Lifetime Return on Capital Gain + Total Income (calculated @Year 10) | £181,690 |
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