Fully Licensed 5-Bed HMO - Below-Market Value

A freehold, detached, fully licensed 5-bedroom HMO in Crowland, PE6, offered at £140,000 after it was UNSOLD at auction. The property is offered VACANT and ready to let, so an incoming owner sets the tenancies and rents from a clean slate, with an estimated achievable income of a minimum of £3,000 per calendar month (£600 per month per room) - £36,000 per annum once fully let across the 5 rooms.

You are buying at £112/sqft across the 1,249 sqft building, against an area average of £240 per square foot, 53% BELOW the local benchmark. With the area-average value sitting near £300,000 against a £140,000 purchase, there is substantial built-in equity headroom for a licensed HMO bought at this price. The HMO licence is already in place, so there is only the process of applying for a new one under the new owner's name; the cost is calculated in the deal numbers below.

As the HMO is vacant, we took a conservative look on an all-in running-cost base of 30% of gross income; the deal nets £19,800 per annum, an 11.5% net yield. On a 75% refinance the Return on Capital Employed reaches 20.2%, leaving £66,980 in the deal working at £13,500 net per annum. As with most property deals where the property is not fully let, you need to take into consideration that during the first year you will not hit the yield stated in this report.