We worked out quickly is that each and every one of our clients have their own goals. Most want to create high cash flow to subsidise their lifestyle, retirement pot, university fund etc. We think that HMOs are one of the best ways to create high cash flow for the amount of money invested. We work with our clients and tailor a HMO development which will allow them to refinance out a good proportion of their investment and make 25%+ ROCE as a minimum.
Often, we see considerably higher returns, and if interest rates drop back down in the coming years these ROCE numbers will be back up around the 40% returns very quickly, without considering any capital uplift in value of the property in the future.
The Challenge
Project VRS was brought to us by one of our agent contacts in Portsmouth. We had been in contact with them about a similar property but the numbers didn't work for us, so we didn't proceed with it. Originally, the seller wanted a fair amount more for this property, so it didn't really look that exciting. After speaking with the agent, we found out that there was room for negotiation on the purchase price. As an investor, you have to work with the numbers but equally, I need to be able to have a vision of the end result looking a certain way. There is always a premium on the GDV for high quality products and for me I need to be sure that the property will allow us to deliver this before we proceed. This building had that in bags. The architecture at the front was stunning, although a little unloved, and the potential for room size was amazing with a little reconfiguration. This approach is 100% the reason that, whilst other similar sized HMOs get valued at circa £630,000 - £650,000 in Portsmouth on a commercial valuation we achieved £730,000 GDV. The Result This property went through a complete top to bottom refurbishment and layout reconfiguration. We removed and moved walls, added en suites and added a rear extension to the property.
Luckily or unluckily this property already had a certificate of lawful usage for Sui Gen as it was previously a rundown large Student HMO. This meant that we had to obtain planning to build the rear extension which allowed us to build a communal lounge/kitchen at the rear of the property and free up what was the lounge for another room.
Top Tip
One of the most important skills in project management is planning. Cliche I know but planning really is power. Having everything planned, scheduled and costed prior to the build starting means less delays, stoppages and need to change things. This ultimately saves time and money. With all our projects we ensure that they are planned, spec'd and designed 100% prior to the project starting.
We have worked with our current build team on numerous projects and they are the best we have come across in a while. We have kissed a few frogs so to speak over the years with builders but that’s part and parcel of property investing I guess!
As with all things in life having a good team around you makes a massive difference. We don't use the cheapest people, but we do make sure the people we use are good from the architects, builders, interior designers and property managers. It makes the entire process a lot smoother, saves a lot of time and probably save you money in the long run.
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