CASE STUDY: 5-bed pandemic-stalled HMO

Meet an investor whose first project meant he really had to live up to the name of his property investment company - Beelief Property. Was it all worth it in the end?

SCROLL DOWN For pictures and the numbers

Anyone who has been investing in property since the start of the Covid 19 pandemic will be no stranger to soul-destroyingly-drawn out completion periods. David Williams not only had to deal with the log-jam at the land registry, he managed to maintain focus when his Ukrainian project manager had to rush back home at the outbreak of war.

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David Williams - Beelief Property

Tell us about your property journey so far? You had quite a wait to complete this, your first investment project?

It was quite a wait! We agreed the purchase at the start of July 2021 but didn’t complete until the end of February 2022. We were caught up in the run-up to the stamp duty deadline plus there were issues with the title at Land Registry - historic CCJs that hadn’t been removed and, in the end, we had to get a ‘tracker’ to find the other party. Also, the fact that the vendor lived in Scotland didn’t help things either. When we did eventually complete, the refurb didn’t start until the end of March, partly due to the fact that our project manager is Ukrainian and rushed back home to rescue family members affected by the Russian invasion.

Before the works

Before the works

Sounds intense. Talk me through the project – you were searching for this property during the pandemic right?

Correct. We took the decision to launch Beelief Property in the summer of 2020. The pandemic put a lot of things in context. We all had a lot of time on our hands and having that ‘headspace’ allowed us to focus on what’s important, our dreams.

How do you reflect on that time then versus the uncertainty we have in the market now?

A slump, crash, correction… whatever you call it isn’t necessarily a bad thing. House prices may drop which works for us as we are actively out acquiring new projects, fewer buyers means less competition and we could also see a drop in labour costs and materials due to lower demand. Our strategy is to retain each of the projects in our portfolio and rent them out and traditionally the rental market remains stable during economic dips. Our financial plan is based on cashflow not capital growth.

Back to the project… How did you source it? Relationships and perseverance. Relationships that we had fostered with estate agents; perseverance because we had initially missed out on this particular property to another buyer. However, we kept in touch with the agent and when the first buyer pulled out, we’d put ourselves in a position to step in.

How did you feel about doing such a back to brick renovation?

Really excited to be honest. A simple paint job and freshen up would have been a bit boring. Louise nicknamed me ‘Demolition Dave’ when we renovated our family home as I got to use a sledgehammer! I love back-to-brick projects. It’s fascinating to see a building stripped back to its original state and then breath a new lease of life into it.

Any major challenges?

To be honest, the project itself was the easiest bit. Other than the steep increase to the original refurb budget (Increase in labour and materials plus additional works like removal of chimney breasts) the works went well. The only hiccups were installing fire insulation in the loft and the build crew falling ill with Covid two weeks from finishing.

Some say the market for HMOs is getting dangerously saturated? – how did you consider this as part of deciding to convert this property?

You could say the car market is saturated but that doesn’t stop Ferrari producing new models and retaining a loyal customer base. I agree, there are a lot of HMOs but our niche in the market is creating desirable co-living and highquality accommodation. And there’s clearly a demand as we were delighted to rent out all five bedrooms within 24 hours of marketing.

What important learning points will you be taking into future projects?

The realisation that conveyancing and legal process takes forever. This has been by far the most frustrating aspect: both buying the property initially and then the re-financing to pay-off the bridging loan and transfer onto an HMO mortgage. We’ve also learnt that you should never stop looking for your next deal!

How do you feel about property investment after completing this first project?

More excited now than before we started. We thought we knew what we were letting ourselves in for when we embarked upon this venture but until you actually do it, nothing can prepare you for the stress, challenges and obstacles that you are going to face. Both Louise and I have full-time, corporate jobs so at times it’s been incredibly tough but having a clear vision means we remain super positive.

THE NUMBERS

Purchase price - £165k

Deposit, Fees and legals - £57k

Renovation estimate - £80k

Renovation actual - £105k

Estimated ARV - £290k-300k (on the open market)

Actual ARV - £260k (Bricks & mortar valuation due to being first-time HMO investors)

Rental PCM - £3,125

Net cashflow PCM - £1,500

Return on capital employed - 22%