One of my more recent investments was this two-bedroom semi-detached property in Sheffield, about a mile and a half away from the City centre and close to a local hospital and two universities. This project was also featured in a case study about me and my journey so far in issue 20 of Property Hub magazine, pages 22-25.
I bought the property at auction. It had a guide price of £55,000, but other properties in the area were going for around £85,000, so I was hopeful I'd get it below market value. On auction day I set myself a maximum limit of £67,500. There were two other bidders at first and eventually I got it at £67,000 - very close to my limit - so I was very lucky!
The refurbishment was completed in around three and a half weeks for a total budget of £7,000. This included a total rewire of the property, together with roof and general repairs, new bathroom fittings, garden refurbishment and internal and external redecoration (including new carpets).
To keep costs down I used William George Auctions to buy luxury bathroom fittings at wholesale prices. I also managed to get most of the work done by a single builder on a rate of £100 per day. The other trades involved were a roofer and a plumber to complete the bathroom, boiler service and gas certificate.
A couple of weeks into the refurbishment I asked a local letting agent to start showing prospective tenants around the property. There was a lot of interest and before the project was even completed we had a student from China signed up to an Assured Shorthold Tenancy (AST) for £500 per calendar month.
Having a tenant in the property allowed me to refinance and I mortgaged the property for £66,000 with Paragon, at 80% Loan to Value (LTV) ratio on a three-year fixed rate at 3.49%.
Since then I've also been able to increase the rent to £525 per calendar month in year two, with the property being continually let for 18 months now.
| Investment | |
|---|---|
| Purchase price | £64,000 (cash) |
| Stamp duty and conveyancing | £3,000 |
| Total purchase price | £67,000 |
| Development costs | £7,000 |
| Total spend | £74,000 |
| Return | |
|---|---|
| Current value | £82,000 |
| Rental income | £525 pcm gross1, £276 pcm net2 |
| Ongoing costs | £249 pcm3 |
| Rental yield | 8.5% gross, 4.5% net |
| Return on capital (ROC) | Approx. 36%4 |
1 £500 pcm in year 1, rising to £525 pcm in year 2
2 £251 pcm in year 1, rising to £276 pcm in year 2
3 £189 mortgage repayment, £10 insurance and £50 letting agent fees. The property is leased on a rent to buy scheme, meaning zero maintenance costs
4 Net rental return of £3,036 in year 1 (with one month void) on £8,500 capital
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