4 bed HMO
Mulberry Road, Birkenhead
Project
Background
& Deal Structure
A 3 bedroom mid-terraced 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.
The RP offered a 10 year lease on this unit, following renovation and having onboarded the property.
Location
Images
Video Walkthrough
Floorplans
Scope of Works
- Part rewire – addition of extra sockets
- Interlinked smoke alarms
- New Boiler located in new position
- Double glazing unit replacements x 1
- Running repairs to DG units
- Fire doors x 5
- Knock-through stud partition back bedroom. Board & skim entry. Possible drop floor to make full room usable (TBC).
- Bathroom light & fan
- Create archway between existing dining and living room
- Stud partition in living room with entry point to create 4th bedroom
- Part Skim – studs
- Part Decor
- Part Flooring – 3 rooms
- Jet-wash yard
Financials
Acquisition Costs
| Purchase Price Sale agreed | £105,000 |
| Renovation Refurbishment & Conversion Costs | £23,000 |
| Architect Technical drawings for approval by HMO officer | £650 |
| Furniture Furnishing to provider’s requirements | £3,000 |
| SDLT Stamp Duty Land Tax | £3,150 UK £5,250 INT |
| Survey RICS Level 2 report | £420 |
| Legals Conveyancing & transaction fees & disbursements | £1,500 |
| Sourcing Sourcing Fee | £4,000 |
| Capital In Total acquisition costs | £140,720 |
Post-Works Refinance
| Gross Development Value Bricks & mortar valuation | £115,000 |
| Uplift Between GDV and original purchase price | £10,000 |
| 1st Charge Lending @75.00% of GDV – recycling funds onto next opportunity | £86,250 |
| Capital Left In Capital remaining in equity post-refinance using mortgage lending | £54,470 |
Registered Provider 10 Year Lease
| Gross Rent p.a. Negotiated rate for area | £12,480 |
| Mortgage p.a. @6.00% lending @75%LTV | £5,175 |
| Operational Expenses p.a. @0.00% | £0 |
| Management p.a. 0.00% | £0 |
| Net Cash Flow p.a. Pre-tax income | £7,305 |
Capital Growth
Capital Gain
| Capital Value @ Year 10 Year 10 value assumed conservative 3.5% annual growth | £162,219 |
| Mortgage Lending 1st Charge lending redemption | £86,250 |
| Equity Investment Capital Capital returned to equity investor | £54,470 |
| Capital Gain @ Year 10 Cap.value less 1st charge lending & equity investor’s capital | £21,499 |
Investor Returns
Income & Return
| Net Cash Flow PA Annual net income after costs | £7,305 |
| Total Net Lifetime Cash Flow Net income over life of lease term | £73,050 |
| Total Lifetime Return on Capital Gain + Total Income (calculated @Year 10) | £94,549 |