Positive outlook for HMOs from Precise Mortgages

Positive outlook for HMOs from Precise Mortgages

I found this interesting article the other day. It’s refreshing to see a positive attitude expressed on HMO lending.

Of course in reality, there are still lots of hoops to jump through, perhaps more, but the products do offer more options. Top slicing for one.

In the Reporter article they quote ‘high than average’ rental yields of 6.3% for HMOs, compared to market average 5.0%. You have to assume those are ‘net’ figures – I mean, I’m not settling for that gross!

For me though, there’s one negative criterion – maximum 8 bedrooms. I’m looking at a co-living product that should perform best with projects averaging 10 to 12 rooms. However, if I find an <8 that works, I’ll be looking seriously again at these financial options!


HMO and Limited Company

Here at Precise Mortgages we’re proud to help landlords with complex lending needs as well as those who have been underserved by high street lenders. Whatever their circumstances we have a broad range of specialist lending solutions. Click here to view our Buy to Let Mortgage submission guide.

Co-living for the older generations

Can co-living help with the impending crisis for older renters?

An all-party parliamentary group on housing and care for older people has released a report warning of an impending crisis in renting for older generations.

According to chair, Richard Best, “The number of households headed by someone over 64 will treble over the next 25-30 years … unless at least 21,000 suitable homes are built a year there will be nowhere affordable for them to live.”

UK’s renting millennials face homelessness crisis when they retire

More than 600,000 members of so-called ‘Generation Rent’ are facing an “inevitable catastrophe” of homelessness when they retire, according to the first government inquiry into what will happen to millennials in the UK who have been unable to get on the housing ladder as they age. People’s incomes typically halve after retirement.

Since we all know that the general population is living longer it seems obvious that specific strategies need to be enacted to deal with the changing demographic. Whether this is led by Government intervention, or is simply entrusted to the Private Rented Sector is the current question at hand.

At SLK we are acutely aware of the changing needs and have been looking at opportunities within rental housing for the older demographic. In this sector, as big fans of co-living, there appears to be an increasingly viable (and valuable) niche opportunity in creating high quality ‘shared housing’ products aimed specifically at older rather than younger generations.

There are so many benefits to co-living it feels like a ‘no-brainer’ to formulate rental products for that ‘post family home’ age, which deliver comfortable, sociable, caring living environments. It is an area we are passionate to explore with like minded partners.

Solar Roof

HMRC to raise VAT to 20% on solar battery systems – EU to blame?

HMRC today pushed for legislation to raise VAT from 5% to 20% on solar battery systems. Why? Apparently because the EU ruled that reduced VAT rates amount to a state subsidy, which is not allowed. Hence the UK needs to get in line.

HMRC pushes steep VAT increase for new solar-battery systems

Treasury proposes rise from 5% to 20%, while the tax on coal will stay at lower rate

I’m generally pro EU but here is an example where its behaviour is wrong, for numerous reasons but not least for slowing the rate of uptake. Strikes me that a stand could be made on matters like these, if the Government had the balls to challenge the EU.

For property people and home DIYers there is an important caveat to be aware of. The 20% rate applies to HARDWARE ONLY, installation charges should continue to be charged at 5% VAT.

Halt the solar and storage VAT hike

This hike is certain to hit innovation and investment in the UK’s growing solar and battery storage market. Not to mention the vital progress on decarbonising heat, which according to the Spring Statement is a strong focus for this government. There could not be a more contradictory step following the declaration of a climate emergency by parliament.

As with all these things there is, of course, a petition to lobby and apply pressure not to bring in the raise. This one courtesy of 38Degrees. I have signed for all it may be worth – better to do a little something than nothing though, right?

Pub lounge

Off market potential commercial conversion project

We are currently treading softly on a totally off market potential deal to convert a pub in one of Harrogate’s outlying villages. This is a significant single plot development project which, if the right investor can be found, we could more pro-actively push forward. We might also be able to work with the vendor for the right development scheme, converting it into either a c.£1m house with a work / leisure annex or up to 2x SA / holiday cottages.

Although we would intend to secure and undertake the development ourselves on this project, we might well be prepared to package and sell it on as a deal to a suitable development partner.


The one that got away. Lessons to be learned?


As we all know, deals ‘fall out of bed’ all the time. The co-working project is just another one, having fallen through today.

Although, this one is a bit unusual as the reason it will not be going ahead is that the prospective landlord / vendor signed up another party to their site without any indication.

We had conducted a little over 2 months of due diligence, specifying our product, the scope of works required, JV partner relations, etc. including 3 site visits and then conducting competitor and market research.

So are there any lessons to learn from this? From a due diligence point of view, no. We had to do what we had to do. Perhaps we could have been a little quicker but then we needed to make absolutely sure of our project parameters given it was a new partnership and a new business.

From the point of view of conversations with the landlord / vendor, yes, we could have done differently and better.

We always consider good communication as essential in everything we do and perhaps, on this occasion, we didn’t maintain frequency of contact. Having arranged a meeting to finalise contracts just under 3 weeks into the future, we didn’t want to hassle the other party so assumed, and then found after 2 weeks the bomb was dropped. Perhaps a friendly weekly call may have prevented this from happening. We can’t know but we won’t be making any more assumptions in the future – so the lesson? – keep checking in regularly with the other party.


Exciting new foray into co-working and business centre

An opportunity has arisen to establish a new business centre in Harrogate encompassing co-working alongside regular offices.

We are currently exploring a partnership with an established provider to expand their brand into a new location in Harrogate.

Of course, there’s a long way to go – we need to research market demand, current competitor offerings and then negotiate the terms on the site we have identified. These things take time, especially when we are effectively setting up a new business. The business centre will be a stand a lone entity, in a partnership under a SPV Limited Company.

At the moment all our market research indicates this project has great potential. ALthough Harrogate has plenty of normal offices available to rent, there is a dearth of serviced offices and no co-working space readily available.

Promising. Watch this space!


Time for the UK to truly commit to co-living … NOW!

The co-living model is developing fast in the USA. There are new entrants all over mainland Europe. And now we see that a German company has secured €1bn to invest in 35 co-living properties creating space for 6000 residents over the next 5 years. The press release states that developments will be located in Austria, Spain, Switzerland and Poland. So what about the UK?

We believe there is another, more agile, way to bring capacity on stream more quickly. To start earning those returns and enable, fast organic growth. To rapidly respond to the changing customer demands. To create a quality, aspirational, socially and environmentally beneficial product accessible to many, many more potential customers. To actively expand the product reach and give local communities decentralised social and economic empowerment.

Properly delivered, co-living has the all qualities to empower genuine social and economic change not just in large cities but everywhere. It is time the UK committed to co-living in a BIG way with vision and ambition.

#coliving #property #propertyinvestment #propertydevelopment

Seeking partner for ambitious co-living business

Seeking partner for ambitious co-living business

We have a fantastic opportunity to convert a commercial premises in Harrogate which we wish to use as a ‘flagship’ property supporting the establishment of a wider ‘co-living’ property investment business. We would love to speak with anybody who thinks they may be able to help me achieve ambitious goals and quickly scale the wider business to a national presence. We have a Business Proposal Outline for those who are interested.

The current property we have our eye on needs moving on very quickly -we would like to put an offer in as soon a possible, as it will definitely go! We have detailed spreadsheets illuminating a variety of exit options – which we are happy to provide.

We have development teams in place and with suitable experience, having most recently undertaken a 35 bedroom student development with a JV partner (now sadly deceased – therein lies a helluva story!) which we have held and are managing.

Although we are principally seeking a business partner, the current property in question has multiple exit options including planning underway for conversion to 7 flats which could be sold for GDV c.£935k, or held for use as single lets or SA. If it used for the wider business, any investment could be corralled in a project specific SPV with 1st or 2nd charge (dependent on purchase finance options) or invested in the business to enable the purchase and development of more than just this opportunity. Outside that business, we may be happy to assist in packaging it as a deal, providing you with any required range of services from simple sourcing to full development and project management to completion.

We are quite protective of the wider Business Proposal as we think there is a fantastic opportunity to exploit and actively expand the growing ‘co-living’ market. If you seriously think you would like to be involved in a co-living business that could really go places we would really love to talk with you.


Co-living is a space investors should be moving into

The Business Proposal is written, the full Business Plan is ‘in progress’, the market is maturing and primed for ‘disruption’. SLK are moving into the co-living arena with our new project(s) and we have ambitions. BIG ambitions (but not BHAGs – and if you don’t know what BHAGs are, consider yourself lucky!).

Why co-living is a space investors should move into

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While researching the current market offerings and defining the niche we want to explode I came across this article from Money Observer which offers some encouragement to investors who are looking at co-living and thinking “is this a space worth serious consideration?”.

I hadn’t read this article before preparing our Business Proposal but many aspects of it are exactly the things I’ve said. It’s really good to have some confirmation we’re on the right track with our ideas. After a bit of a public hiatus (we’ve been working furiously out of sight!) we will be much more visible from now on. Watch out – you have been warned!!

Green zone kitchen GK1

Done! Zetland House refinanced!

It has been a long and difficult journey, to say the least!  But yesterday afternoon we finally got the commercial refinance in place for the Huddersfield Zetland House project.

Green Zone – Kitchen 1

We now have a fantastic group of properties in a ‘cluster style’ student format providing 35 bedrooms, 8 kitchens and 14 bath/shower rooms.

We are immensely proud and feel we can allow ourselves at least a small celebration!

Of course, the work is never over – we need  to maintain our standards and improve working practices, becoming a more profitable long term investment.

Blue Zone B1 – single en-suite room

But finally, 22½ months after starting development work, 25 months after drawing up the initial evaluation documentation, we complete our ‘exit’.

I’m not kidding when I say this is a project I could write a small (no – maybe large) book about, involving;

  • before we even started, a problem with an area of ‘no-man’s land’ not on any title deed
  • subsequent declining of purchase finance and the deal apparently collapsing a number of times
  • eventually negotiating a vendor assisted purchase …
  • … utilising an exchange and delayed completion strategy
  • requiring an application to be made by the vendor for possessory title of the ‘no-man’s land’ with severe penalties for non-compliance
  • raising an initial £400k of development investment
  • completely stripping out, knocking about, reconstructing and refurbishing c.5000 sq ft of original hovel HMOs
  • in parts, finding the buildings in worse condition than anticipated (and we’d already thought it was really bad)
  • so bad in one part we had to remove the entire 40 sq m+ floor and start again
  • adding substantial dormers creating 4 bedrooms, 2 bathrooms and a kitchen in unexploited roof space
  • negotiating early end of lease to enable commercial conversion of a takeaway and a retail unit
  • digging down and excavating to create 5 new rooms, 2 bathrooms and a kitchen from the old beer cellars
  • Flood Risk Zone 3 complications
  • Planning problems and Planning Consultant issues
  • the collapse of the principle Project Director with a major heart rupture on site half way through development
  • navigation through the subsequent chaos
  • overshoot on delayed completion leading to …
  • … seeking emergency 12 month bridging, eventually from a private equity fund
  • further raising of finance to meet additional development and some overspend related to delays
  • (somehow) managing to hold to onto everything and meeting our target of 35 letting rooms for the student market
  • then there’s the whole refinancing process including dealing with low valuations and having to amend company structures to satisfy lenders
  • and (as they say) much, much more!
Rear Courtyard with Yorkshire stone table and seating

We have continually learned so much, about so many different aspects of property development, JV relationships and raising finance. It has indeed been a rollercoaster ride but the value to our collective education has been invaluable.

So, after jumping from the previous simple Buy-Refurb-Sell project to one involving all of the above on on our very next project – what next!?