What if there was a way of securing your money so it is as “safe as houses”?

What if there was a way of using that money to buy not one, not two but as many as ten high-yielding quality residential investments? At Millennia Property we work with investors every day who are doing just this.

In today’s market it’s no longer enough to have a property that just makes the grade, you need to ensure that your property is cash flowing positive every single month. We invest in HMO’s because they are the ultimate residential property investment! However, they will only make money if you buy them in the right area in the right town with the right demand!

And with our exclusive portfolio builder product, you can get started from as little as £50,000 and recycle it again, and again, and again. But what if you’ve got more than that and want to get in on the big monies? Well, here’s an example of one such property that creates cash every single month that one of our portfolio investors is just about to complete on. This is for serious investors but it brings in serious cash every single month!

Property Address: 13 bedroom super-HMO:

• Investor: LSH
• Purchase Price: £300,000
• Cost of Works £40,000
• Letting Rooms 13
• Gross Annual Rent £64,170
• Net Annual Rent 85% x Gross £54,545
• Expected Commercial Value £681,806
• 60% LTV - Max Drawdown £409,084

This type of HMO is what we call a super-HMO. Reason being is that every unit either has ensuite or kitchen facilities. These larger buildings also work well as semi apart-hotel or serviced accommodation units (you can never find good quality accommodation in any major cities nowadays). This particular unit will also feature some goodies including a cinema, gym and chill out area together with a kitchen on every floor.

Typically most refurbishments take around 1-3 months. This one is a little more than this because of the works involved (after all it is a 4000+ square foot unit). However the timescales are known up front and because of this, the bridging amounts are taken into account from the start.

Other Costs

• Bridge Legals/Commitment Fee £1,500
• Commercial Broker Application Fee £4,091
• Valuation fees - Commercial £1,900
• Total £7,491

This isn’t like your typical residential investment. A commercial investment requires a substantially different survey – after all the surveyor is valuing the HMO as your business and thus it’s a much more intensive effort. That leaves you with a higher quality report which encompasses a level of due diligence not found in your typical homebuyer report.

Summary

• Total Clients Cash Required £130,291
• Max Draw Down Expected from Lender £409,084
• Repay Bridge -£240,000
• Repay Clients Cash Invested -£130,291
• Net Position (Cash back or Cash left in) £38,793
• Interest Rate 6.19%
• Annual Interest Cost £25,322
• Expected Profit after Expenses & Mortgage £29,222

MONTHLY NET CASHFLOW £2435.16

This is your net cashflow after taking into account costs such as the utility bills, management, maintenance bucket, voids bucket and more. A true high-yielding investment that makes the grade in 2011.

Our aim with the HMO Portfolio Builder is as follows:

• The Goal is no or low money left in after 2/4 months.
• The drawdown is up to a maximum 60% of the Commercial Value.
• The property MUST require works to make it HMO compliant.
• You do need up-front cash to pay the 30% deposit, broker fees and cost of works.
• You do need to be an experienced landlord or you can team up with an experienced landlord.
• The commercial Lenders will want P&L, balance sheets, bank statements etc as part of underwriting process.
• You will need to ensure that you acquire any licences or consents required – ie HMO licence, planning consent, building regulations etc
• The AST’s for every tenant must be signed prior to drawdown.

If you would like to talk to someone regarding this exciting investment strategy for retirement planning or help with any property investment strategy then please call Kenny Ranns on 01604 521301 or email kranns@millenniaproperty.co.uk