When new investor Edward Langston approached the Purseglove team, he was very concerned about a property investment opportunity in which he had already invested a significant amount of money.
He was seeking a trusted partner to help him navigate the tricky situation, who could provide advice on how to proceed. Our team of experts worked discretely with Edward to evaluate the legitimacy of his investment, and together we turned a potentially disastrous situation into a compliant and profitable investment.
Edward story
Edward first learned about the investment opportunity when he attended a sales seminar – a company was offering investors the chance to invest funds into its end-to-end property investment solution. In return, it would source, develop, and manage high-yield HMOs (houses in multiple occupation) in the North of England on behalf of the investors. The company was selling a seemingly simple ‘hands-off’ investment opportunity, perfect for investors who wanted to make money from property with minimal time investment.
Edward opted in, and the company agreed to purchase and convert three properties in Nottinghamshire on his behalf. He made a significant upfront investment for the acquisition of the properties and also paid 50% of the proposed HMO conversion costs. However, it soon became clear that the opportunity was not all that it seemed, and within a few months, Edward was on the phone with our team of property sourcing agents at Purseglove, voicing his concerns.
The problem: Misguided investment and non-compliance issues
After speaking with Edward, we knew the first thing we needed to do was inspect the properties and evaluate the proposed development plans. Our team always prioritises creating safe and compliant rental properties, and we immediately spotted glaring compliance issues. The properties were not suitable for conversion into HMOs due to undersized rooms and improper space planning for en-suites. Under the Licensing of Houses in Multiple Occupation Regulations 2018, HMOs are legally required to comply with the stipulated minimum bedroom sizes.
Next, we conducted due diligence on the company in which Edward had invested funds. Our findings were worrying; we uncovered numerous negative reviews online and discovered that the director was involved in criminal investigations and showed signs of financial instability.
As Edward had already made such a large investment, he found himself in a precarious position. Walking away from the deal would likely result in substantial losses, but he now suspected that he had fallen victim to a poorly managed (if not fraudulent) investment scheme. It was clear that we needed to quickly devise a plan to help save him from facing catastrophic losses.
Our solution: Minimising losses and changing strategy
We could see that Edward was in a dire situation and knew that he needed to proceed cautiously to minimise risk. We developed a strategy and supported him as he put the new plan into action. We recommended that he convert the properties into rental homes for families, rather than pursuing the risky and potentially untenable HMO route. This would significantly lower redevelopment costs while still allowing the properties to generate rental income.
Converting a property into an HMO costs significantly more than refurbishing one to let to families because HMOs must adhere to strict fire safety and minimum room size regulations. Therefore, we knew that the funds that Edward had already invested for the more complex HMO refurbishments would be enough to cover almost all the cost of turning the properties into single-let family homes.
Out advice was to approach the company carefully and with tact to avoid the situation becoming heated or confrontational and to minimise risk. After some initial resistance, the company agreed to the change in strategy. Utilising our experience with refurbishment management, we worked alongside Edward to oversee the work being carried out and ensure that the properties were refurbished to a high standard and in compliance with all relevant laws and regulations.
Edward also had another property under development with the same company. By the time he sought our advice, the development was almost complete. Upon completion, we inspected the property, only to find that the building work was substandard, with workmanship below even basic DIY standards. We engaged reputable builders to rework and finish the project to the correct standards. And most importantly? We helped Edward to end his involvement with the rogue company.
The outcome: A turnaround story
When Edward first approached us, his situation looked pretty dire. However, with our advice and support, he was able to successfully convert all four investment properties into family homes. The properties were rented out quickly and have performed well ever since. Our intervention helped Edward avoid further financial damage and instead turn what could have been an investment disaster into a profitable and sustainable property portfolio.
With his trust restored in property investment, Edward has since expanded his portfolio further through our services and now entrusts us with the ongoing letting and management of his rental properties.
The lessons: The importance of due diligence in property investment
Edward’s experience underscores the importance of conducting thorough due diligence when choosing a third-party property investment partner. Unfortunately, many of the people who invested in this particular company were not as lucky, suffering large financial losses and failed projects. This case serves as a reminder that ‘hands-off’ property investment schemes can still come with high risks, particularly in an industry that remains largely unregulated, even today.
At Purseglove Property, we’re committed to ensuring that every development meets or exceeds regulatory standards. We provide fully transparent and strategic property investment services, including sourcing consultation, to allow investors like Edward to build and grow profitable portfolios with confidence.
*For client confidentiality we have decided to change this clients name and photograph.
