Real Estate Investor Magazine South Africa November 2016 | Page 63

INVESTMENT SERIES: PART ONE UK HMO INVESTMENT CASE STUDY INVESTMENT BREAKDOWN Property type: Mid terrace Location: Isaacs Hill, Cleethorpes, South Humberside Size: 7 Bedrooms; 2 bathrooms/shower room and kitchen, 2 bedroom flat PURCHASE INFO Initial Market Value £235,000 Purchase Price: £225,000* Refurbishment £25,000 * Includes Fees, Stamp Duty, Refurbishment, Appliances & Furniture Expected End Valuation £250,000 PROPERTY COSTS Down payment/deposit £225,000 Buying costs £7,000 Initial improvements £25,000

 FINANCE OPTIONS Option 1: £230,500 Cash upfront needed for first investment Option 2: £245,000 Cash upfront plus Shortterm Bridging Finance loan (available @ 9% over 8 months) MORTGAGES
(assuming cash upfront scenario) First mortgage (70% TV) £175,000 Equity realization (30% LTV) £75,000 Actual investment after refinance £50,000 -Once refurbishment is complete 2 - 3 months later -Loan-to-value ratio can change depending on your personal criteria www.reimag.co.za MONTHLY INCOME Total number of units 7 rooms plus 2 bedroom flat Average cost per unit £33, 572 Total Gross rent monthly £3,272 per month **The room rents will vary between £85 and £95 per week depending on the size of the bedrooms. There are 2 smaller single rooms, which would attract £85 per week, 5 larger double rooms that would attract £95 per week and a 2 bedroom flat that would attract £110 per week MONTHLY EXPENSES Monthly operating costs £2,315 Less voids (vacancies) 327 (10% of gross rent) Mortgage £875 (@6% per annum) Property Management fee: £393 (12.5% of gross rent) Insurance £40 Maintenance £160 Council tax £120 Utilities £400 (Gas, Electricity, Internet, Refuse & Water) *This depends on which product we select but we tend to work on 6% per annum (interest only) at 75% Loan To Value (LTV) NET PROFIT £957 per month NET PROFIT £11,484 per annum RETURN ON INVESTMENT £11,484 /£55,000(21% per annum) If you are interested in building an HMO business, want to do a JV, provide finance at higher than market returns or secure an ongoing asset based income then contact [email protected] NOVEMBER 2016 SA Real Estate Investor 61