ASK192: Is this HMO over-priced? PLUS: Should I get planning permission before I buy?

The Property Podcast

Rob Bence & Rob Dix

Business News, News, Business, Education, Investing

4.8 • 2K Ratings

🗓️ 25 June 2019

⏱️ 7 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

This week on Ask Rob & Rob, the guys are answering two very different questions on the topic of HMOs. The first question comes in from another Rob who’s got in touch for some feedback on a potential HMO in Stoke-on-Trent. The property is fully tenanted and has five double bedrooms, all with en-suite bathrooms. On the face of it, the property seems like a pretty good deal. The monthly gross rental income is £3,870 on a purchase price of £335,000 - that’s a gross yield of over 13%! However, his concern is the bricks and mortar valuation. The property was purchased for £95,000 at the back end of 2015 as an office with a much smaller HMO above. Rob is finding it hard to believe that the refurb price would have cost more than around £130,000 - £150,000 considering house prices have probably only risen by about 15% over the last 4 years. His other concern is the lack of local comparables for him to do a true bricks and mortar valuation. He’s worried that the property is overvalued as a stand alone asset. So what would Rob & Rob do in this situation? Our second question comes in from Mahlia who’s looking to purchase more HMO properties in Manchester and Leeds, but has been put off by article four which requires planning permission to change residential property to a HMOs. Should this be a real concern or should she still proceed with the aim of getting planning permission? Rob D’s response is pretty clear on this one. Tune in to have a listen. Do you have a buy to let or property investment related question for Rob & Rob? You could feature on the next episode by giving us a call on 013 808 00035 and leaving a message with your name and question (normal UK call rates apply). Or if you prefer, click here to leave a recording via your computer instead. The next question on Ask Rob & Rob could be yours. Have you joined us over on the Property Hub Forum yet? Our online community is friendly, informative, and the members are waiting to welcome you with open arms. So get yourself over and introduce yourself. See omnystudio.com/listener for privacy information.

Transcript

Click on a timestamp to play from that location

0:00.0	Hi, I'm Rob. And I'm Rob. And this is Ask Rob and Rob.
0:09.0	Welcome to Ask Rob and Rob, where every week we fill in those gaps in your property knowledge by answering a couple of questions from listeners just like you.
0:16.0	This week we've got two HMO themed questions from Rob and Malia, so we'll listen to those in just a sec,
0:20.4	but if you're thinking up a question of your own, here's how you get it into us.
0:23.7	Yeah you can call in and leave us a voicemail on Oh on the 3 808 triple 035 or you can go to
0:30.4	Property Hub dot net forward slash ask
0:33.8	either way it's super simple
0:36.0	and that's why we've got two questions in this week
0:38.4	but not super simple questions to answer
0:40.5	so Rob I hope you've had your coffee and absolutely no favoritism here whatsoever, but we'll let the person called Rob go first.
0:47.0	Hi Rob and Rob, this is Rob. I'd like to get your feedback on a potential HMO purchase in Stoke on Trens.
0:54.3	It's pretty tenanted, five double bedrooms, all on-suite.
0:57.1	I went to see it yesterday.
0:58.1	It's pretty decent, overall well-kitted out.
1:00.4	The numbers look quite good on the face of it. Monthly gross rental income,
1:04.0	3,870 pounds on a purchase price of $335,000, so over a 13% gross yield.
1:11.0	So it looks quite good on paper and if you work out the
1:13.8	ROI on a 75 percent loan to value mortgage, commercial mortgage,
1:18.6	then you get about to about 20 percent ROI on the money left in. The big question mark I've got is the bricks and mortar valuation because the property was actually purchased for only 95,000 pounds as an office with a much smaller HMO above back in late 2015.
1:36.0	Looks like planning commission was agreed and the conversion and refurb was done.
1:40.0	I've got nowhere knowing the costs of that but I find it hard to imagine it could have been much more
1:44.6	than about 130 to 150,000 for the full conversion and property values in Stoke haven't gone up
	...

Please login to see the full transcript.

Previous episode | Next episode

Disclaimer: The podcast and artwork embedded on this page are from Rob Bence & Rob Dix, and are the property of its owner and not affiliated with or endorsed by Tapesearch.

Generated transcripts are the property of Rob Bence & Rob Dix and are distributed freely under the Fair Use doctrine. Transcripts generated by Tapesearch are not guaranteed to be accurate.