Portfolio of two x4 bed HMOs
Accrington, Lancashire BB5
Project
Background
& Deal Structure
Two terraced properties, each converted into a 4 bedroom house of multiple occupancy (HMO) and leased to a Registered Provider on a long-term commercial lease.
The Registered Provider (RP) previously expressed interest in these properties, which has now been converted to their specification.
The RP offered an initial 10 year lease on these units, following renovation and onboarded the property in June 2021.
Location
Images
Grange Street, Accrington BB5 2EY
Wilfred Street, Accrington BB5 2HY
Project
Scope of Works
Conversion completed Spring 2021 and RP tenanted shortly after.
RP has not requested any adjustments, but may do if we re-open negotiations to increase the lease cost.
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Project
Financials – Existing
Below are a set of financials based on when the initial contract was setup in Spring 2021.
It is our opinion the rent rate is below current expectations.
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Acquisition Costs
| Purchase Price Sale agreed | £205,000 |
| Renovation Refurbishment & Conversion Costs | £0 |
| Architect Budget for plans drafting plans and submission to local authority | £0 |
| Furniture Furnishing to provider’s requirements | £0 |
| SDLT Stamp Duty Land Tax | £6,150 UK £10,250 INT |
| Survey RICS Level 2 report x2 | £1,000 |
| Legals Conveyancing & transaction fees & disbursements for both units | £2,500 |
| Sourcing Sourcing Fee | £12,000 |
| Capital In Total acquisition costs | £226,650 |
Optional Extras
| Project Management Coordinating contract teams | £0 |
| Lease Setup Lease negotiations & contract admin with Registered Provider | £1,600 |
Post-Works Refinance
| Gross Development Value Bricks & mortar valuation (£90k + £75k) | £165,000 |
| 1st Charge Lending @75.00% of GDV – recycling funds onto next opportunity | £123,750 |
| Capital Left In Capital remaining in equity post-refinance using mortgage lending | £102,900 |
Registered Provider 10 Year Lease
| Gross Rent p.a. Existing contract rate | £19,680 |
| Mortgage p.a. @6.00% lending @75%LTV | £7,425 |
| Operational Expenses p.a. @0.00% | £0 |
| Management p.a. 0.00% | £0 |
| Net Cash Flow p.a. Pre-tax income | £12,255 |
Capital Growth
Capital Gain
| Capital Value @ Year 10 Year 10 value assumed conservative 3.5% annual growth | £232,749 |
| Mortgage Lending 1st Charge lending redemption | £123,750 |
| Equity Investment Capital Capital returned to equity investor | £102,900 |
| Capital Gain @ Year 10 Cap.value less 1st charge lending & equity investor’s capital | £6,099 |
Investor Returns
Income & Return
| Net Cash Flow PA Annual net income after costs | £12,255 |
| Total Net Lifetime Cash Flow Net income over 10 year term | £122,550 |
| Total Lifetime Return on Capital Gain + Total Income (calculated @Year 10) | £128,649 |
Project
Financials – Projected
Below are a set of financial projections based on units we are currently closing for this RP.
The price point used per room is £72/per week.
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Acquisition Costs
| Purchase Price Sale agreed | £205,000 |
| Renovation Refurbishment & Conversion Costs | £20,000 |
| Architect Budget for plans drafting plans and submission to local authority | £0 |
| Furniture Furnishing to provider’s requirements | £0 |
| SDLT Stamp Duty Land Tax | £6,150 UK £10,250 INT |
| Survey RICS Level 2 report x2 | £1,000 |
| Legals Conveyancing & transaction fees & disbursements for both units | £2,500 |
| Sourcing Sourcing Fee | £12,000 |
| Capital In Total acquisition costs | £246,650 |
Optional Extras
| Project Management Coordinating contract teams | £3,500 |
| Lease Setup Lease negotiations & contract admin with Registered Provider | £1,600 |
Post-Works Refinance
| Gross Development Value Bricks & mortar valuation (£90k + £75k) | £165,000 |
| 1st Charge Lending @75.00% of GDV – recycling funds onto next opportunity | £123,750 |
| Capital Left In Capital remaining in equity post-refinance using mortgage lending | £122,900 |
Registered Provider 10 Year Lease
| Gross Rent p.a. Pre-negotiated rate | £29,952 |
| Mortgage p.a. @6.00% lending @75%LTV | £7,425 |
| Operational Expenses p.a. @0.00% | £0 |
| Management p.a. 0.00% | £0 |
| Net Cash Flow p.a. Pre-tax income | £22,527 |
Capital Growth
Capital Gain
| Capital Value @ Year 10 Year 10 value assumed conservative 3.5% annual growth | £232,749 |
| Mortgage Lending 1st Charge lending redemption | £123,750 |
| Equity Investment Capital Capital returned to equity investor | £122,900 |
| Capital Gain @ Year 10 Cap.value less 1st charge lending & equity investor’s capital | £-13,901 |
Investor Returns
Income & Return
| Net Cash Flow PA Annual net income after costs | £22,527 |
| Total Net Lifetime Cash Flow Net income over 10 year term | £225,270 |
| Total Lifetime Return on Capital Gain + Total Income (calculated @Year 10) | £211,369 |
Comparables
Grange Street, Accrington BB5 2EY
Wilfred Street, Accrington BB5 2HY
Availability
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This deal is available under our standard terms with a 25% downpayment of the Sourcing Fee paid to secure the opportunity, deductible from the final balance due at Exchange of contracts.
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