10% yield on Gillingham HMO with excellent location

The flash crash of the pound on Friday may have taken the headlines by storm, signalling what some have construed as doom and dismay for the UK economy. Many theories abound on its cause, some believe a rogue trading algorithm that follows negative Brexit headlines and social media trends was sparked by Francois Hollande’s statement that Britain should suffer a hard exit from the EU, leading to more technical trading algorithms following suite. While others blame manipulation or human error.

Whatever the cause, it is probable that the pound may drop even lower. What does this signal to the UK property market? Amongst headlines that JP Morgan are moving thousands of jobs out of the capital, it is likely that London will continue to suffer the brunt of the Brexit fallout- especially the commercial market. However, this could provide further opportunities for those involved in office to residential conversions: such as Martin Skinner of Inspired Homes, our next speaker at the Property Vault Medway (book your tickets here https://thepropertyvaultmedwaymartinskinner.eventbrite.com). Martin featured as the first article in a five page spread on the 100th edition of the YPN (Your Property Network) magazine, and his story really will inspire you so make sure you book your tickets early!

Furthermore, it seems that foreign investors will continue to pour money into the UK property market due to favourable exchange rates. As long as you view property as a long term investment vehicle, then as I’ve explained in various blog posts the lack of available housing and increasing population means that property is a safe place to put your money (don’t even mention bank saving rates to me!!)

Entering the Medway Property Market just over a week ago, this 3 bedroom terraced could provide an opportunity as a four-bedroom House of Multiple Occupation (HMO) in Medway. It entered the property market a couple of weeks ago and is on the market for offers in excess of £170,000.


You can view the property here.

The best thing about this property, other than the excellent location only 0.5 miles from Gillingham station, is that all the rooms are large at over 10 metres squared. I would suggest keeping the kitchen diner and lounge as is, and combining the downstairs utility and bathroom to make a fourth bedroom.

All four bedrooms would then be converted into en suites. I’ve had a chat with my builder who has done several HMOs in the area and he believes this may cost between £40-50k, not cheap, but when each room should achieve £500 per month that is quite a good monthly rental income of £2,000. So the total cost comes to £170k purchase price, Stamp Duty of £6k, legals at £2k and a refurb of approximately £50k which totals at £228,000. Accounting for a months of void periods the rental income could come in at £22,000 per annum bringing just under a 10% – or a 22% Return on Investment (assuming a 75% LTV mortgage).

There is much talk that all HMOs should have at least five bedrooms and you should aim for six or seven. However, sometimes the smaller HMOs can attract a higher quality of tenant. With four ensuite rooms, so close to the station, you will really differentiate yourself from the other HMOs in the area. This property is also directly opposite Medway Park gym and should easily be rentable. If you chose to, you could also turn this into a student let as it has a great location close to the Universities of Medway. There is strong student tenant demand on this road and some of my landlords own properties here.

As always, if you wanted some advice on a property investment in the area, I will give it to you. Just ping me an email with a relevant property to hasan@bullfinchproperties.co.uk and I will let you know my thoughts.

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