Believe it or not; SOURCING INVESTMENT PROPERTY is a skill. It requires in-depth knowledge of an area & a dedication to finding the right properties within your perceived HOTSPOT (Stoke-On-Trent was voted top 5 HOTSPOT area in the UK)
Five years ago, the Founder Of Quality Lets (himself a person with a large property portfolio) predicted a certain area would become a Hotspot for HMOs (Houses of Multiple Occupation). Here is his own account of the scenario that unfolded:
“The Doctor we call him as he is a Doctor but now it’s more of an affectionate term than a title now as we have become to love the Doctor! A few years ago I first met the Doctor when I sold him a portfolio of 4 student houses. Whilst the sale was going through we had to sign students up for the following year – risky or what?! We knew that the sales wouldn’t fall through so we were happy to take a risk for the client. Anyway after a successful year of renting to Students, I eventually persuaded The Doctor to invest in my hotspot area.
We viewed five properties all with a view to converting them to HMOs. I immediately told him to buy all five to which he smiled and said ‘let’s just do one for now as I want to see how things go’ (Cautious Investor is the Doc). So we settled on one which was listed at £75,000 and which I negotiated down to £72,000 on his behalf.
On the day of completion we collected the keys. The next day our joiner was in constructing a partition wall for a downstairs bedroom & hanging the fire doors. When he had finished, our electrician put in the smoke alarms & did the relevant checks & certification, at the same time the plasterer was there finishing the partition wall. Then was the turn of the Gas Safety Engineer to do some work & safety checks alongside the decorator.
After a busy week it was furniture time. We took care and attention to choose the right furniture for the property maximising space & incorporating a great contemporary mono style. In the meantime we had already been scouting for tenants. All this time the Dr is on my case asking how things are and visiting the property. Within 3 weeks of its being ready, all three housemates were moved in.
“The property fully rented out benefits The Doctor to the tune of £13,520 gross per annum. The property has never been void in a period of nine months. Two tenants have left but the rooms filled immediately”
At the moment we have another sale going through for an investor within our hotspot area. At the price of £62,000 & will require moderate renovation. This will also achieve a net £800pcm for the investor.
“In order for me to work with an investor I need to know exactly what his/her needs and objectives are. As an ex-financial advisor, I understand how vital it is to gain a thorough understanding of an investor’s objectives.”
A Quality Skillset
Although we are a small team at Quality Lets, each member of the team brings their own particular set of skills. One thing we do have in common is that we are all local Landlords ! So you can be assured that we all know & understand the rental market. Together, we have a combined experience of 23 years providing and finding quality accommodation in the area. Read more in our About Us page.
Heres a FB snippet from a local investment company. November 2018
RESI HOUSE TO 6 BED ALL ENSUITE HMO DEVELOPMENT OPPORTUNITY IN STOKE-ON-TRENT. (Photos attached are current floor plans, proposed scheme floor plans and some photos of our finished products).
Hey all, I’ve got a deal here. Its a 3-bed mid terrace house near the University Hospital, which we are going to convert into a 6 bed all ensuite property under Permitted Development. I personally own several HMOs in this area and it’s one of the prime locations in the city for doing a high-end HMO. Professional tenants mainly hospital workers.
We’ve been managing it as a BTL for the last few years as it as an R2R and the option holder has done a runner, and we have taken over the option and we are exercising the option to buy of 115k, and now the landlord wants to sell and so we are DTV on this deal. We are still ‘letting’ it but it’s vacant and will remain vacant until it’s been fully developed into a 6-bed HMO.
Similar properties are selling for around £170,000, on the same street. This is £115,000.
It needs a lot of work doing to it, the renovation has been fully Quantity Surveyed and our main contractor who has done over 50 projects for us will be taking the lead on the build.
We can start immediately on this project, after completion. It will take approx 22-25 weeks to complete fully and tenant.
Our ensuite rooms in this area get £425-495 pcm, and our occupancy rate for this area is extremely high all year round.
Some headline figures:
Purchase price: £115,000
Rental Income: £2,517 (includes 5% void contingency but our occupancy rate is 99%). ***END***
So they want you to buy @115K then spend 78K on conversion from 3 rooms to 6 rooms with en-suites plus £12K on furnishing, not to mention loss of rent for 25 weeks. So a total spend of 205K to achieve 6 rooms @£425 to £495pm.
First of all id like to know where they are getting their furniture from, i say £12,000 what are they furnishing?
Now the odd thing is i can buy 2 houses for you @85K each so giving you a total of 8 rooms and far less headache with HMO compliance and you will gain similar rents and benefit from growth on 2 houses, and your 2 houses will be kept as they are houses so when you want to sell you can sell to anyone.
The reason they get investors to part with so much is basically they will make around 20K plus on the deal then they will manage it for you. The deal sounds too good too be true hey, price 115K and similar properties on the street selling at 170K whys he passing it on? Buy it yourself spend a few quid on it and flip it, by the looks of those figures you should make around 50K plus.
They offer you between £425-£495pm well blow me over I’m getting similar rents on a 3 bed i picked up for 72K with a total spend of 4K. If the market was regulated they would not be able to get away with it, this is high risk and your get out options are very limited.
Today one of my investors has just made an offer on a property that was up at 90K, in order to secure the deal i advised an offer of 85K on the viewing, as the property was a bargain offering 4 double rooms and in the most perfect location like 5 minutes of J15 M6 and right in the middle of the distribution hub within the city.
Offer accepted at 85K on the day and I’m expecting an annual rental income of no less then £18,200 gross and these rents are average compared to other rooms within the city. I also expect the property to gain value over the next 5 years so our client will benefit from a great rental yield as well as capital growth, win win situation.
We believe in keeping everything simple and only source properties that require minimum updating.
If your not investing with us then your losing money.