The figures are in on our most recent development, Bayford Road, Littlehampton.
We started our Bayford Road project in February and completed at the end of June and is now fully let!
The period terraced property was originally 5 bed, spread over 3 floors, which needed to be totally gutted. In doing so we were lucky enough to uncover exposed brickwork to all chimney breasts and brickwork to the hallway, incorporating this into the design theme for feature walls.
We have created an 8 bed HMO with 7 bathrooms, designed for professional sharers.
Purchase Price £220,000
Build Costs £150,000
Refinance £555,000
Rental Income £56,640
ROI 35.6%
Gross Yield 10.2%
We have very happy investors and even happier residents!
I have heard a lot about people moving away from HMOs due to the risk. I understand it – many places are over concentrated in therefore occupancies and refinance valuations have dropped. This is something we saw in Brighton – the student market became saturated and rents and occupancy dropped.
Does this make them bad investments? It depends on you and your product. Are they hard work – yes, is there more regulation – yes, is the competition fierce – yes. So if you are looking for an easy hands off investment, where occupancy will always be constant and you will not need to reinvest in your asset then HMOs are not for you.
If, like us you are professional landlords and developers, happy to put in the work and actually enjoy the experience of creating nice places to live that is relevant to the market and prepared to reinvest and reconfigure assets so that they remain relevant – then they are great investments – AS PART OF A BALANCED PORTFOLIO. Do I just own HMOs, no.
Do I continue to buy them, yes! HMOs are moving on, the trend is with Coliving – shared living by choice, with much more consideration to the quality and practicality of the property to reflect the needs of the market. HMOs are here to stay, it is not that people only stay in them out of necessity but that they now do so out of choice, better for many that than a lonely studio flat or bedsit.
SO there is a market and they do work IF you do it right and CONTINUE to do it right. Do not oppose regulation, it is usually done to improve standards and protect both landlords and tenants. Embrace it and even encourage it, get ahead of the wave, become a thought leader and get involved in the conversation.
Is anyone else feeling the pinch when it comes to delays around the process to buy property at the moment?
We have really felt a delay in the process of buying projects recently & have taken a look to see how we can address this & is there anything we can do to mitigate the delays. As the old adage goes; time = money & therefore we have to try & reduce the time things are taking.
Why are things taking longer;
The increased transactions across the market caused by the looming end to the stamp duty holiday has meant solicitors are working at maximum capacity & inevitably therefore things will take longer to be dealt with.
Funding delays – traditional lending is still very cautious & the legal due diligence is extensive & can take as long as the legal process to buy.
It’s never simple – this is very specific to us but would probably apply to most investors/developers – the very nature of what we buy is complicated. It’s how we add value, we solve problems & create value where others perhaps could not & this therefore requires a keen & detailed look at the title, covenants & other important legal factors to do with the property.
So what can we all do to help things along?
Have a key team of people around you, we work with two legal teams well known to us & who know how we do things. Nazish Ahmad at Jury O’Shea solicitors & Justin Thompson at Thompson Allen, this means they have a lot of our ID’s etc already & know what they are looking for us straight away. This saves lots of time.
Funding – Be ready & choose your route early, this will save you time & money in the long run.
Be tenacious, always ask what you can do to help your teams & be kind to them, it will go a very long way to making sure you are top of their list to deal with.
Dealing with property investors is a key skill and one that has taken me some time to get anywhere near right. I was not a natural salesman when I came into full time property – I was a military/ defence consultant with very limited true sales experience. When I started off I tried too hard, was a yes man and told people what they wanted to hear. Then I over corrected and became a surly take-it-or-leave-it type – an approach I mistook for integrity.⠀
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As I have got older and greyer I have learnt to follow the following steps – something that is far easier and gets better results.⠀
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➕Be honest at all times⠀
➕Sugarcoat nothing but be positive and solutions led.⠀
➕Be yourself ⠀
➕Be humble (it may not come naturally but it will become so) ⠀
➕Treat everyone with respect⠀
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What do you think?
Here are our top 3 favourite bedrooms we have created at our most recent developments, which have been let to coliving professional sharers. All of our interior designs are done in house by the T5 team.⠀
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When we put together our initial design ideas, we have key pointers to work from:⠀⠀
➕ Our residents, who are they, what type of professional?⠀
➕ Location… urban/city centre/residential⠀⠀
➕ What type of building are we working with… period building/modern?⠀⠀
➕ Hard wearing and practicality of well thought out spaces⠀⠀
➕ Wellbeing… we want our residents to feel at home, to enjoy living in their home and be proud, make sure there is space to work from home⠀⠀
➕ Budget and our investors opinions, likes and dislikes… the big one! rarely but it does happen, our investor may have their own interior design theme, which we in turn look at the above points to make sure these will work, we sometimes do need to tweak these!⠀
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What we try to achieve:⠀
? Making the most of all the space, sometimes rooms can be awkward in shape when renovating, especially eaves bedrooms, so if we can we will design and build in desk areas, wardrobes and we have also created the option for raised beds.⠀
?? Unique designs and colour combinations that work and are not too over ambitious!⠀
? Features, we always try to retain original features within our properties, whether this be original exposed brick walls, chimney breasts etc, or feature wallpapers to make sure the rooms are unique from property to property.⠀
? Using modern methods in our finish, whether this be WIFI controlled heating (which can be tricky if a resident decides to have an airfryer in their room under a sensor – true story ?), USB socket points, key locations for all sockets, dimmer lights⠀
?️ Bedroom furniture that compliments the interior design but is also hardwearing and functional⠀
?️ Fully dressed rooms, finishing touches such as artwork/prints
Who doesn’t love before and after renovation pics!? Here are a few of our most recent development, West Buildings in Worthing.
Works started in late October 2020 with completion in mid Feb 2021.
??????? ?????: Mixed use development. The upper part of the building has been developed to a 6 bed HMO, all with en-suite shower rooms, designed and finished to suit co-living requirements and HMO licencing standards. The ground floor commercial unit has also been completely renovated and is now ready to let.
The Core Values of Target Five are not a million miles from those of the British Army. Funny old thing that given they were based on them! But do we get it right always – no! Do I get it right always – definitely no! We are, however, trying to hold each other to account and make sure that we do get it right in the end, if not first time. ⠀
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In the Army there is something called ‘The Service Test’, when something bothers you or you have made a decision that you doubt, stand in front of the mirror, look yourself in the eye and tell yourself you have followed the Core Values, if this feels uncomfortable then you have probably not. That is the point to reconsider, even if it means losing face.⠀
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This is exactly where I was a week or so ago. A project of mine was nearing completion and I was walking around with my letting team to discuss letting strategy, furniture and decoration. We had planned to do all units as 2dio type accommodation, but the top units felt too small for this. Being in a great central location I felt sure they would let, but was this the right thing to do? The accommodation was cramped and I would not like to live there, despite the great finish. If I would not like it how can I, with integrity, let someone else take it. That night I talked it through with my Wife and we agreed that we were making a mistake. So we reversed it and lost a bedroom in each unit.⠀
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Don’t get me wrong, I am a fan of making money, but no fan of exploitation. We made the call but I knew immediately from the response of the team that they also felt more comfortable with that. I am also confident that if I had not made the call, someone would have said something. And guess what – it actually feels good, almost like a relief!⠀
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In order to maximise your investments and growth in your investment ability you have to develop a Growth Mindset!
Most investors I meet are negative in their mindset, they follow what has worked for others, they doubt their abilities. They think they are constrained & limited to what has been done before. “That doesn’t work”, “thats been done” etc. This is classic ‘Fixed Mindset’. Boundaries are set & it is impossible to ever exceed expectations, but investments will underperform if faith in what has worked before is misguided i.e. peoples misguided faith in pensions etc.
The few exhibit a Growth Mindset. They see their own development & what they can achieve with their investments as being without constraint. They can constantly improve themselves, learn & become more competent – the Grow! They have the same approach to their Investments. They set goals but are never limited to them, they accept failure as part of the process & use it to Grow! Constant reassessment of opportunities & exploitation. Positivity always!
You need to be part of the select few in the second camp. Carol Dweck – total legend – ‘Mindset’ (2014) is a must read. Or check out her Ted Talk – https://www.ted.com/talks/carol_dweck_the_power_of_believing_that_you_can_improve?language=en
Our favourite day, dressing day! at our West Buildings, Worthing project.
T5 Director Tina was joined by our colleagues; Megan & Winnie from our partner company; Sussex Property Partnership at our completed renovation today, adding the final touches ready for professional photography.⠀
We thought we would share a few of our candid pics with you before the final completed portfolio shots.
A few weeks ago we shared with you our new carbon sustainable development (Cross Laminated Timber (CLT), Modular Construction), project in Newland Street, Worthing.
Since then planning went to committee last week and all seems favourable, they have recommended a slight tweak to the binstore location, meaning we will need to shave a little space off of our living/kitchen space, rather than one of the bedrooms, which will work well.
Today we were onsite to meet the Surveyor to plot and locate the positions for the new services. We hit a bit of block ‘literally’ with being able to survey the inside of the building as the previous owners have yet to clear the space. The current commercial property has been used for a number of years as a storage facility. So a new date is to be pencilled in to complete this!. Along the way, we have acquired some new artwork to the front of the property, what do you think of our ‘funky pigeon’ ?
