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HMO’S ARE THEY RISKY?

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. 

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NEW PROJECT UNDERWAY – WEST BUILDINGS, WORTHING

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West Buildings, is a late Victorian mixed-use property in the centre of Worthing, adjacent to the seafront. this building is doing nothing for the local community and economy! But once we’re finished with it it’ll be part of a bustling parade of shops and flats, providing accommodation for professionals, and a shop for locals.⠀

We plan to turn the upper part of the building into a 2-bed flat and the lower part into an HMO-style 3 bed flat, all of which can be accomplished under Permitted Development. The ground floor commercial unit will be retained. ⠀

Our designs for this project are based on the concept of ‘urban industrial’ here you can see a couple of our mood board ideas.

We will be sharing a video of the inside of this property soon, as we have started the satisfying stage of ripping out! ⠀

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Target Five Property Consultants – HMO Journey So Far

Since our formation in 2013 we have established ourselves as experts in the HMO property development field having undertaken 350+ renovations.⠀
It has been interesting putting together this post and pictures to see how far we have evolved from what was; I guess we shall call ‘standard & compliant’ HMO renovations that were similar across the country.⠀

The type of HMO being offered to let now has vastly changed due to the changing needs and expectations of the tenant, who want and deserve a level of luxury in their shared accommodation. Taking the above into account, we have had to evolve and adapt our model quickly and with consideration. ⠀

Changes we have made: – ⠀

? We view every new property as an opportunity and challenge to shake things up. With each new property we hold interior design brainstorming sessions, which we then develop into mood boards.⠀
? Each property is CAT 5 & broadband ready, with USB ports located in the ‘useful’ places.⠀
? Considered and thoughtful living spaces, designed to be practical for coliving homes.⠀
?Casual spaces such as hallways and landings are not forgotten and are given a little extra something, whether it be a feature wall, amazing paint effect or vinyl art.⠀
? En-suite showerrooms: this change we feel is a must given the current climate of the coronavirus, being able to offer your tenants as much of their own safe space as possible! not to mention the end rental figure achieved for our investors.⠀
? Bespoke furniture: here we focus on our interior design and what will work within budget but also be durable! Using companies that specialise in landlord furniture packages, such as @landlordfurnitureco who offer fantastically designed furniture for all concepts and budgets.⠀

And much more!⠀

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Projects Completed

PRESTON STREET, BRIGHTON

We sourced and developed this property for a new investor.  This was a tricky development, as the property itself was a 4 bed flat over 3 floors above a restaurant, to access the flat you had to go through the restaurant itself!  So there was a lot of legal constraints to iron out during the conveyancing process re: leases and then obtaining planning permission to reinstate the separate entrance to the the property, which we cordoned off from the restaurant itself.

Target Five renovated this property in a six week time frame that our investor had to work to.  The property is now a stunning 6 bed HMO located in the centre of Brighton.

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The future is bright, or perhaps a little less dark?

An announcement is expected imminently according to This is Money Magazine from the Royal Institute of Chartered Surveyors (RICS) that it is readying itself to begin valuation on properties again.

Could this mean the housing market will be back up and running again soon? What does this mean for investors, and homeowners?

The inevitable suspension of valuations and house moves due to the social distancing guidelines that were essential to the fight against COVID-19 meant that the housing market all but stopped. This resulted in lenders pulling mortgage deals overnight and subsequently a lack of confidence set in and immediately affected house prices .

A spokeswoman for RICS told the magazine that the return to valuing properties will come with a set of new guidelines for valuers and we suspect it will be a minimised service, but this is good news for the property market.

It is likely that the government advice not to move will remain in place, and the impact on business’ and employment will be significant.

It is unlikely that the market will be a buoyant one, but for us and our investor clients that is no bad thing.

This means we are seeing a number of investment opportunities surface and our local contacts in Brighton, Hove, Worthing and Littlehampton have already started to approach us with excellent off market property investment opportunities. Now is the time to invest and maximise returns. OK, these returns may take longer to show in terms of capital value gain, but our success model of adding value, size or design will means that your money could work harder than ever for you. Even if you don’t want to own an entire property or only have a small amount to invest, we have property investment opportunities for you to invest in. Now is the time to contact us to be involved in our next project.

We are also starting to see some of the darkness lift, our constructions sites are starting to return (safely of course) and our suppliers delivering again which means we will again be able to offer excellent quality accommodation in shared living environments.

All of this means that slowly, steadily but most certainly surely, the future economic picture is looking a little less dark. Actually no, a lot less dark and almost bright.

Tina Wenham – Director of Target Five

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Are you in Property or in Money?

This is a question I ask clients when I first meet them to understand their motivation in getting in touch. Usually it draws a blank coupled with a glance towards the door. I then explain that it is a simple question and one that very quickly gets to the bottom of why they want to buy another property. Are they doing it because they are convinced of the long term fundamentals of property and are looking to hold it, or because they want to refurbish and sell it, to flip, or to sell in the near future? If it is the former, they are in or want to be in property, if it is the latter they are only using property as the vehicle to get money.⁣

Investment Banks are primarily in money. They cash out their position at the end of the trade, they may be almost instant arbitrage type opportunities or longer term holds, but they will cash out once their prediction is realised i.e. stock goes up, or down if shorted. Few investors actually believe truly in the stock they are holding, but Warren Buffett is a good example (I Just read the Snowman – great read!) of someone who is in stocks, or in companies. He sees it as an investment in that company and its long term fundamentals – he has held shares for decades. He invests in his investments and keeps doing so because he believes in them.⁣

It is important before setting out on a property journey to understand where you are. Neither are wrong, or right for that matter and it can be both or neither and you can of course have a dual strategy, which is what I personally believe in. McDonalds are to a large extent a property company that uses burgers as a vehicle to get occupancy on their real estate sites, but they have to make money from the burgers as well.⁣

I have some friends who do rent-2-rent, subletting in old language. They achieve great cash flow and many see themselves as being in property, which they are, but in reality they are only using it as a vehicle to make cash flow. They benefit from the increase in rents over time, but most likely will have to pay higher rents in return to achieve these.⁣

I went full time into property because I believe I am in property. I believe in the long term fundamentals and see property as any other physical commodity, it has value, you can touch it and there will always be a need for it. Since we came off the gold standard and moved to a fiat type currency – one that is not pegged to anything physical so just floats, tied to other floating things – we have seen constant inflation. Our Keynesian western economics relies on inflation. We all know with reasonable certainty that a cappuccino that costs £3 today will probably cost £6 in 10-20 years time. The other way of looking at it is that if you had sold the cappuccino and held the money, you would only then be able to buy half a cappuccino. Property generally outperforms the markets, which is not really a good thing, but it does not need to, it just needs to keep up with it and hold its value. Stocks and shares may rise or fall, companies come and go. Property stays. The great thing about it is that it pays really well along the way!⁣⁣
⁣⁣

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Projects Completed

WESTERN ROAD, LITTLEHAMPTON

Target Five acquired this very rundown 7 bedsit property, with a separate studio flat in Western Road, Littlehampton.

Working in cooperation with the local licensing officer, Target Five renovated this property to legal requirements to a 6 bedroom, 4 bathroom HMO and a 3 bedroom, 2 bathroom self contained flat.

The property has been finished to the highest Target Five design specification, making this an attractive rental proposition to either students or young professionals.  This property has recently been revalued at nearly double the purchase price!

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Projects Completed

WILSON AVENUE, BRIGHTON

Target Five acquired this 4 bedroom semi-detached chalet bungalow for our investor and have competed the renovation by reconfiguration/subdivision of existing rooms to a 6 bed HMO (Large kitchen communal space, 6 bedrooms, 3 shower rooms and a back garden area)

The property has been finished to exceptionally high specification, with final finish and furnishings designed by T5.

This property is ideal for students/professional sharers, with great access links to the city centre, close proximity of Brighton Racecourse, Brighton Marina and local amenities.

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Projects Completed

COOLHAM DRIVE, BRIGHTON

Target Five acquired this 4 bedroom house in October 2019 for a new client, whom was recommended by an existing Target Five client whom has undertaken a number of property acquisitions and renovations with us.

Refurbishments works to turn this property into a 6 bed HMO included; building out the first floor bathroom encompassing the dead landing space and then split into x 2 new shower rooms. Splitting the downstairs lounge to form x 2 additional bedrooms and enlarge an existing bedroom.

Coolham Drive is located in East Brighton, ideal for letting to professionals working at The Royal County Hospital, American Express HQ, as well as having 24 hour bus routes intl and out of the city centre and Universities.

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Projects Completed

EASTERN ROAD, BRIGHTON

This two bedroom first floor large maisonette was acquired by T5 for a returning client, this property proved difficult to get over the conveyancing line but with the fabulous potential on offer, perseverance and determination from all parties we got there.

Target Five converted this property from a two bed maisonette to a six bed HMO with a loft conversion, which now offers a great rental yield return for our investor. The project started at the end of October 2019 was completed in the first week of January 2020.

The property is finished to the highest specification, with architectural design by BPM Architects with the complete refurbishment works undertaken by Tim and Stuart at Brighton Renovations.

This property is in a fantastic location and offers versatility of tenant, as it is within close proximity of Brighton College, The Royal Sussex County Hospital and Amex HQ, as well as being within easy reach of all Universities thanks to 24/7 direct bus routes.