HMO Conversion Project

An investor purchased a large Victorian property near Leeds University for £480K, planning to convert it into a licensed 8-bed HMO. The refurbishment budget was £140K, covering structural works, fire safety compliance, ensuite bathrooms, and a commercial kitchen. Several lenders declined due to the HMO licensing requirements and the complexity of achieving the mandatory Article 4 direction compliance in the local authority area.

We identified a specialist HMO lender from our panel who understood the Leeds student market and Article 4 requirements. The facility was structured as a light refurbishment bridge at 75% of purchase price, with the refurbishment costs rolled into the facility and drawn against surveyor-verified stage completions. We also pre-arranged a long-term HMO mortgage for the exit, ensuring the investor had rate certainty from day one.

The refurbishment was completed in 5 months, on budget. The property was valued at £950K on completion as a fully licensed 8-bed HMO, achieving a gross annual rental income of £62K. The investor refinanced onto the pre-arranged HMO mortgage at 75% LTV, releasing their initial equity plus an additional £90K in capital to fund their next project.