31st March 2018
Can you see the potential in your property? You may not be able to see the potential HMO in your property, however, it does not stop others from seeing it!
A landlord approached me to let his three bedroom property. The particular service level this investor had taken with us only involved the marketing of his property and referencing of the tenants. We had no further involvement with the rent and inspections. Two gentlemen were found to take the tenancy on the property, and all the referencing went through fine. No red flags were raised.
Seven months down the line, I was contacted by the landlord, asking for assistance. Apparently there were seven single people living at the property. It would seem that the two original gentleman never moved in, they set up a little business subletting the property to an extreme. After the removal of the current occupiers, there was evidence that as many as 12 people had lived in the property at one time. Apart from the high level of wear and tear on the property, which the landlord was able to claim from the deposit with our help; the biggest problem that the landlord had was that these two gentlemen were making money, a lot of money off the top of his investment.
On a twelve month AST the landlord was looking at an income of around £15,000 per year. The gentlemen subletting, on the basis of £70 per person per week and assuming 12 people living at the property including the lounge, were looking at around £43,680 per year, and even with the rent being paid to the landlord they were still earning around £28,680 in profit!
So, this third party not only caused damage and seriously breached the agreement, they also made around £28,680 profit from this. I doubt even the legal action would have cost them that amount, still leaving them with tidy profit.
Even though this situation was not great and caused the investor some expense, he did learn a valuable lesson! That his property was ripe for a conversion to an HMO.
The landlord decided to take on our full services. With a little expense, and some changes, including the implementation of some of the basic HMO requirements, we increased this investors rental income from around £15k closer to the mark of £30K!
It just shows that thinking outside the box may work for you. So, get in touch to see how much you should be making on your investment property.