Today was a completion of a facility we often refer to as ‘bread and butter’.
For many years, properties suitable (in location and size) to convert to HMO’s have been regular transactions and recently there has certainly been an increase in appetite from property investors to explore this market, or extend their current portfolio.
This example, in Hayes, UB3, was around £450,000 to buy and will require approximately £100,000 of works to become fully compliant. The end result will be an annual income of £65,000 and an end value of £650,000.
The client will create 6 self contained bedrooms, each with ensuite, together with usually two kitchens, sometimes a communal lounge and garden.
The lender funded 65% of the GDV, which meant around £150,000 of client investment and all the work covered. Once occupied and income producing, the short term facility will be repaid by obtaining a traditional long term commercial mortgage, at which point the initial investment will be released, allowing the client to go onto the next project.
The short term facility cost works out at around 10% pa and no payments are made throughout the term, as interest is paid at the end. Please feel free to contact me for any advice on this type of project.