When we first met experienced HMO investor Sarah Collins, she was facing a serious setback with a property purchase and was on the verge of walking away from the deal. Despite securing what appeared to be a great deal on a property, damp problems picked up by the surveyor had thrown everything into uncertainty.
Sarah was looking for an experienced partner to help assess the situation and explore potential solutions. The Purseglove team stepped in to provide a creative solution that not only saved the deal but transformed it into a highly successful HMO investment, achieving an impressive 17% yield.
Sarah’s Story
Sarah was looking for an opportunity to expand her property portfolio when she came across a three-bedroom terraced house on Rightmove. The property was listed for £112,000 and was previously owned by an elderly man who had passed away. It required significant renovation work to convert it into an HMO, but she was confident it could be a very profitable investment.
Sarah successfully negotiated the asking price down from £112,000 to £100,000. At this point, both parties were happy with the deal, and things seemed to be going smoothly. However, during the conveyancing process, an unexpected obstacle emerged that threatened to derail the entire investment.
The problem: Property down-valuation
During the formal valuation process, a surveyor identified noticeable damp issues around the living room’s bay window. While the damp was not extensive, the surveyor estimated the repair costs at £20,000 and revalued the property at £80,000 (£20,000 below the agreed price). Sarah was disappointed, as she could now only access financing based on the £80,000 valuation, leaving her unable to proceed with the deal at the agreed £100,000 purchase price.
It was hard to see a way around this financial obstacle and Sarah considered pulling out of the deal, which now appeared to be unviable. Luckily, she reached out to our team for advice before making her next move.
Our solution: Creative deal renegotiation
After speaking with Sarah, we decided we needed to get a second opinion on the property’s damp problem before rushing to pull out of the deal. We called in one of our trusted specialists to perform a full damp inspection. The results confirmed our suspicions – the actual work required to resolve the damp issue was far less extensive than the surveyor had estimated. Our specialist estimated that the repairs would cost just £4,000, which opened up the doors for potential renegotiation.
Armed with this new information, we worked with Sarah to propose a reasonable solution to the vendors who had already discounted the property from £112,000 to £100,000. We recommended that she offer to meet them halfway at £90,000. Faced with the fact that their property may only be worth £80,000 and keen to secure a sale, the vendors were happy to accept the new offer.
Next, we developed a creative solution that would give Sarah time to complete the necessary renovations and allow for more flexibility with financing. We worked with her to secure a delayed completion, which gave her a six-month window between exchanging contracts and the deal’s completion date. During this period, Sarah was granted access to the property to complete the damp repairs and other renovations. This additional time was invaluable to Sarah and offered the vendors peace of mind as it guaranteed that the sale would go through.
The outcome: Uncertain deal to 17% yield HMO
Sarah came close to giving up on the deal, but our team helped her turn around what seemed like a lost cause. Once we had access to the property, we helped get the damp issue resolved quickly and to a high standard. With the damp problem out of the way, the mortgage lender approved financing based on the agreed £90,000 price.
Sarah then successfully converted the three-bedroom house into a five-bedroom HMO featuring two shared bathrooms and a large kitchen/diner. The property went on to become a highly successful HMO investment, delivering an impressive 17% yield. Sarah is grateful she didn’t walk away from the deal that day!
The lessons: Expertise matters
Sarah experience highlights how collaborating with experts can make or break a property investment deal and shows why it’s important to always get a second opinion. Seeking a second opinion with our trusted damp specialist reduced the estimated cost of repairs from £20,000 to just £4,000! By consulting with our team, Sarah was also able to leverage our experience in property negotiation and creative problem-solving to secure the time and flexibility she needed to finish the renovation project before finalising her mortgage. Without our advice and support, she may have given up on what turned out to be a highly profitable investment.
At Purseglove Property, we’re a property management and investment company that puts people first. We have extensive experience in structuring and negotiating successful property deals and creating safe and compliant rental properties. We also benefit from having a trusted network of experts at our fingertips. Our property investment services, including sourcing consultations, HMO management, and refurbishment management, which help set investors like Sarah up for success.
Need help or advice with a property investment deal? Contact our team today.
*For client confidentiality we have decided to change this clients name and photograph.
