If you’ve ever asked, “What does a great property investment look like?” – this post is for you.
In this breakdown, I’m sharing a real-world example of a 6-bed HMO conversion that highlights exactly what’s possible when you get the right deal, structure your finances smartly, and manage the property professionally.
The Scenario: A Typical HMO Conversion
We took on a property in need of a heavy refurbishment – we’re talking structural upgrades, full layout redesign, and converting it into a high-spec 6-bedroom HMO. From the outset, we ran three financial scenarios:
- Best Case
- Realistic Case
- Worst Case
We budgeted for voids, management costs, tenant turnover, and even conservative capital growth estimates. Let’s look at how it all stacked up…
The Key Financials
Investor Capital:
- Initial investment required: £132,801
- Cash remaining in the deal after remortgage: £256,826
Monthly Net Rental Income:
- Best Case: £1,601
- Realistic Case: £1,217
- Worst Case: £1,089
That means even in the worst-case scenario, the investor is still clearing over £1,000/month in net income – after management, voids, and all fees are accounted for.
What About the Costs?
Every deal has hidden costs that can bite into profits if you’re not careful. Here’s what we factored in:
- Voids: 5% of gross rent
- Management fees: 12% + VAT
- Tenant find fees: £713/year
- Loan interest during refurb: £5,833
- Total management cost vs net rent: 14.61%
We even assumed zero capital growth in the rental income returns to keep it ultra-conservative.
Payback Period – How Fast Can You Recoup Investment?
We calculated the number of months it would take to recover the cash left in the deal:
- Best Case: 160 months
- Realistic Case: 211 months
- Worst Case: 236 months
That’s under 20 years worst-case to be fully paid back from rent alone. And remember, this doesn’t even include future refinancing or capital appreciation gains.
Returns That Beat the Banks
When compared to leaving money in the bank or even in an index fund, these returns are hard to ignore:
- Realistic annual ROI from rental income: 5.7%
- Worst case ROI: 5.1%
- Total return (capital growth + rent): Up to 7.5%
And these aren’t “hyped” projections. They’re based on careful analysis, real costs, and conservative assumptions.
Takeaways for Passive Investors
Whether you’re time-poor, cash-rich or simply looking for safer, higher-yield returns than the high street offers, this is what’s possible through HMO investing when done right.
You bring the capital – we bring the deals, structure, and management to make it work.
