4 bed social housing HMO project
Project:
Background & Deal Structure:
A 3 bedroom semi-detached property requiring modernisation, ideally suited for conversion into a 4 bedroom house of multiple occupancy (HMO) and leased to a Registered Provider on a long-term commercial lease.
We have an established relationship with a Registered Provider (RP) who expressed interest in this property, after passing all their criteria checks.
Area / Location
Located close to the centre of town, with an abundance of local amenities and facilities, a short distance to the train station and motorway networks providing access to Durham, Newcastle and beyond, Shildon is well located.
The property is perfectly positioned for access into the town, is in close proximity to many local, national and global employers, and benefits from a variety of local recreation spots including local golf courses, parks and forests.
Video Walkthrough:
Scope of Work
- 4 x Bedroom fire doors
- 2 x additonal fire doors on either side of communal
- Electrical upgrade & adjustments – 4 bed HMO, smokes, em lighting, adjustments
- Stud walls built to create 4th bedroom using front living area
- Stud walls plastered
- Woodwork matched
- Property fully decorated – white washed throughout
- Boiler serviced, CP12, TRVs added where required
- Thumb turn locks on external doors
- Extending small bedroom upstairs – taking down existing wall and rebuilding to extend room
- New carpet for extended bedroom
- Shower screen added
- Tiles painted in bathroom
- Waste removal
- Furniture built
- Carpets re-fitted after decorating
- Fire boarding the back of stairs and the cupboards
Financials:
Acquisition Costs
| Purchase Price Sale agreed | £80,000 |
| Renovation Refurbishment & Conversion Costs | £25,000 |
| Architect/Planning Budget for plans drafting plans and submission to local authority | £700 |
| Building Control Estimated cost for compliance inspections & sign-off | £700 |
| Furniture Furnishing to provider’s requirements | £3,200 |
| SDLT Stamp Duty Land Tax | £4,000 UK £5,600 INT |
| Survey Chartered surveyor onsite inspection and report | £600 |
| Legals Conveyancing & transaction fees & disbursements | £2500 |
| Insurance Buildings insurance to cover the reinstatement value | £550 |
| Sourcing Sourcing Fee | £7,500 |
| Capital In Total acquisition costs | £124,750 |
Optional Extras
| Project Management Coordinating contract teams | £2,500 |
| Lease Setup Lease negotiations & contract with Registered Provider | £1,040 |
Post Works Refinance
| Gross Development Value Bricks & mortar valuation | £100,000 |
| Uplift Between GDV and original purchase price | £20,000 |
| 1st Charge Lending @75.00% of GDV – recycling funds onto next opportunity | £75,000 |
| Capital Left In Capital remaining in equity post-refinance using mortgage lending | £49,750 |
Rental Income
| Gross Rent p.a. Negotiated rate for area | £12,480 |
| Mortgage p.a. @6.00% lending @75%LTV | £4,500 |
| Operational Expenses p.a. @0.00% | £0 |
| Management p.a. @0.00% | £0 |
| Net Cash Flow p.a. Pre-tax income | £7,980 |
Capital Growth
Capital Gain
| Capital Value @ Year 10 Year 10 value assumed conservative 3.5% annual growth | £141,060 |
| Mortgage Lending 1st Charge lending redemption | £75,000 |
| Equity Investment Capital Capital returned to equity investor | £49,750 |
| Capital Gain @ Year 10 Cap.value less 1st charge lending & equity investor’s capital | £16,310 |
Investor Return
Income & Return
| Net Cash Flow PA Annual net income after costs | £7,980 |
| Total Net Lifetime Cash Flow Net income over life of lease term | £79,800 |
| Total Lifetime Return on Capital Gain + Total Income (calculated @Year 10) | £96,110 |
Nett
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Lifetime
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