Case Studies

Here are some examples of the costs and returns of investing in properties in other parts of the country. Of course, we all know that there are no guarantees and things can go wrong. You should always seek financial and legal advice before making such an investment. These examples are here to show you that a different approach can bring some promising results.

Case One

This 6-bed student HMO (House in Multiple Occupation) in Huddersfield was on the market for £140k. Working with a joint investor, I secured it for £118k. Rebecca saw the potential straight away. It was a great space, huge high ceilings with windows about 6ft square. But it needed a lot of work. The 6-bed space was extended to an 8-bed property by converting the derelict cellar (which had windows and external access) into 2 bedrooms and a shared bathroom.

This is how the figures look:

Purchase Price £118,000
Fees and costs £10,000 (including £3,500 sourcing fee)
Renovation cost £40,000 approx.
Project management £4,000
Total £172,000

With the renovations complete, the property will be worth approximately £220,000.

Fully occupied this should generate an income of £720 per week (8 rooms @ £90 each)

720 x 48 weeks (to allow for voids) = £34,560 per year GROSS income

As the investor wishes to build up a property portfolio the next step was to go for an 80% commercial mortgage on a bricks and mortar valuation, leaving 20% equity in the property.

Taking into account the running costs of the property, plus these mortgage repayments, this should leave a monthly income in the region of £1,600 NET. To be shared between the investor and Rebecca Smith Property Services.

 

Case Two

This large 4-bed Victorian property is in Wallasey, near Liverpool. The property was in a very poor state and the plan was to turn it into a high end 7-bed HMO, aimed at professionals. 12 weeks were set aside for the builders to complete the job – challenging but achievable.

This was another joint investment between me and a private investor. On completion of the renovation, it will be refinanced with a commercial mortgage providing the optimum valuation to reinvest in the next property. The private investor will have put in around £160-170,000. After taking account of running costs and the mortgage repayments, both of us should receive around £500-550 NET per month each. With the mortgage in place most, if not all, of the original sum will be available to reinvest.

 

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