One of my first investments was this three-bedroom terraced property in Sheffield. The property already had a four-bedroom Houses in Multiple Occupation (HMO) license and is located very close to the new University of Sheffield social sciences building. Crookesmoor is also a desirable suburb in Sheffield, with 33% of university students choosing to stay on in the area after graduation.
I obtained the property through Blundells estate agents. I had expressed interest early on but originally lost out to another buyer. However, when that sale fell through, Blundells came back to me and accepted my offer of £175,000. I realised how vital it is to secure properties below market value (BMV) wherever possible, as this meant I could clawback equity from the property within two years, in addition to the long term rental income.
The refurbishment was completed in around four weeks for a total budget of £6,000. The key to a good HMO property is high quality shared living spaces - particularly the kitchen and bathroom. By achieving a premium finish in these areas, I was able to let the property easily.
To keep costs down I used William George Auctions to buy luxury bathroom fittings at wholesale prices, and my Wickes Trade Pro account to secure a high-end kitchen in a clearance sale.
| Investment | |
|---|---|
| Purchase price | £175,0001 |
| Stamp duty and conveyancing | £7,000 |
| Total purchase price | £182,000 |
| Development costs | £6,000 |
| Total spend | £50,5002 |
| Return | |
|---|---|
| Current value | £205,0003 |
| Rental income | £1400 pcm gross, £650 pcm net3 |
| Ongoing costs | £750 pcm4 |
| Rental yield | 9.6% gross, 4.5% net |
| Return on capital (ROC) | Approx. 15%5 |
1 Bought with 80% loan to value ratio (LTV) mortgage with 20% deposit (£37,500)
2 Based on initial deposit and outlay costs
3 Remortaged with 75% LTV (£153,750)
4 £500 mortgage repayment, £15 insurance, £115 letting agent fees and £120 for contingencies e.g. void periods, repairs etc.
5 Net rental return of £7,800 on £51,250 capital
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