INVESTORS: Gillingham three-bed terrace with a 9.7% rental yield

I was leaving a landlord’s property yesterday when I noticed a similar property for sale on Balmoral Road, Gillingham that has just come onto the Medway property market with no onward chain for £190,000. The three bedroom terraced house presents a great opportunity for an investor to convert it into a House of Multiple Occupation (HMO) for excellent returns of up to 9.7%.

As this is the exact same layout of my landlord’s property, I gave him a call to ask how much he had spent on renovating it into a four-bed non-licensable HMO.  Here is the floor plan:

You can view the property here.

As you can see, there is a partially walled lounge leading to the dining area and a kitchen to the back of the property; this could be walled off to make another double bedroom. The kitchen would be moved into the dining area, and the back area renovated into two separate shower rooms. Upstairs could be left as is, or the bathroom could be converted into a third shower room or toilet to make extra space for bedroom 3.  Bedroom 2 could be split into two for single occupancy only.

You may need planning permission from Medway Council to convert it from a residential building to a HMO, but that is likely to be granted as long as proper health and safety procedures are followed to ensure the property will be in a good condition for living. In any case, it would be prudent to fit the property in compliance with HMO standards, with fire doors, interlinked smoke alarms, carbon monoxide alarms and a heat detector in the kitchen. The basement would need to be sealed off to keep it non-licensable. After discussion with the landlord who has done a similar renovation this cost is around £15,000-17,000.

I know from being in similar properties in Gillingham with this layout that the ground floor and first floor front rooms are very large at around 16 square metres. They could be rented to couples or individuals for between £450-500 per month. Bedroom two should get around £425, or £600 if split into two, and the smaller bedroom £400, which in total could bring in a potential monthly income of £2,000. Factor in two weeks’ void period a year for each room, which is average for the area, then yearly yield could be £20,000. That’s an excellent yield of 9.7% including renovation costs.

The best bit about this investment is that it is very close to Gillingham station, ensuring that capital growth will be good. Over the past five years this property has risen 90% in value and looks set for an expected similar increase of value in the upcoming years.

As you will have seen in Monday’s blog post Medway’s rent prices have been one of the highest in the country and there are plenty of opportunities in the area. At times when the outlook on the stock market is looking bearish, an investment in Medway property seems a safe bet as rents are continuing to climb and homes continue to be undersupplied.

If you want to hear about the latest buy-to-let deals, subscribe to the Medway Property News blog. If you are considering investing in property in the area and wanted to talk about it, I’m happy to give my impartial advice. My email is hasan@bullfinchproperties.co.ukor give me a call on 07499 726676.

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