6 Bed Social Housing HMO
Project:
Background & Deal Structure:
A 3 bedroom end-terraced property requiring modernisation, ideally suited for conversion into a 6 bedroom house of multiple occupancy (HMO) and leased to a Registered Provider on a long-term commercial lease.
We have an established relationship with a Registered Provider (RP) who expressed interest in this property, after passing all their criteria checks.
Deal requires cash or bridge for the front-end purchase due to the scope of works.
Vendor requires an upfront 3% reservation fee, deductible from the purchase price and an Exchange of Contracts in 8 weeks.
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, Liverpool and beyond, Southport 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
- Full rip out (including kitchen)
- Install 13m of new stud walling to create new rooms
- Create an opening in existing stud wall
- Create two doorway openings in Brick.
- Add new boiler
- Add new circuits where required and replace consumer unit First fix for 5 new radiators
- First fix for two new bathrooms
- Plasterboard and skim new studwork
- Install new kitchen
- Install new two bathrooms
- Install 9 new fire doors and required mouldings
- Install 5 new rads
- Paint throughout
- 2nd Fix all new electrical
- Fit carpets and flooring throughout
Video Walkthrough:
Financials:
Acquisition Costs
| Purchase Price Sale agreed | £195,000 |
| Renovation Refurbishment & Conversion Costs | £55,000 |
| 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 | £4,800 |
| SDLT Stamp Duty Land Tax | £9,750 UK £13,650 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 | £278,350 |
Optional Extras
| Project Management Coordinating contract teams | £5,500 |
| Lease Setup Lease negotiations & contract with Registered Provider | £1,400 |
Post Works Refinance
| Gross Development Value Bricks & mortar valuation | £260,000 |
| Uplift Between GDV and original purchase price | £65,000 |
| 1st Charge Lending @75.00% of GDV – recycling funds onto next opportunity | £195,000 |
| Capital Left In Capital remaining in equity post-refinance using mortgage lending | £83,350 |
Rental Income
| Gross Rent p.a. Negotiated rate for area | £26,520 |
| Mortgage p.a. @6.00% lending @75%LTV | £11,700 |
| Operational Expenses p.a. @0.00% | £0 |
| Management p.a. @0.00% | £0 |
| Net Cash Flow p.a. Pre-tax income | £14,820 |
Capital Growth
Capital Gain
| Capital Value @ Year 10 Year 10 value assumed conservative 3.5% annual growth | £366,756 |
| Mortgage Lending 1st Charge lending redemption | £195,000 |
| Equity Investment Capital Capital returned to equity investor | £83,350 |
| Capital Gain @ Year 10 Cap.value less 1st charge lending & equity investor’s capital | £88,406 |
Investor Return
Income & Return
| Net Cash Flow PA Annual net income after costs | £14,820 |
| Total Net Lifetime Cash Flow Net income over life of lease term | £148,200 |
| Total Lifetime Return on Capital Gain + Total Income (calculated @Year 10) | £236,606 |
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