Olaf Fetter and Jacqueline Standen live in Nottingham and joined Platinum Property Partners (PPP) in May 2011. They currently have a portfolio of three premium Houses in Multiple Occupation (HMOs) for young professionals.
In August this year, they purchased a property that would be their fourth HMO, and it’s their biggest HMO project yet. In their project diary, they take us from start to finish.
Olaf: “We weren’t really looking for a property at the time, but during the last year, we kept driving past one on our way to our other properties and Jacqueline had seen it on RightMove. It had been on the market for a while and the price had slowly come down a little bit. We had ignored it at first, because it was way over our normal budget. When the price reached £650k, we decided to have a look, and we were impressed with the amount of space – more than 350sqm in an up and coming area and built by the Germans, so very good quality."
Jacqueline: “It transpired that the supermarket brand Lidl had actually built it six years before. When the company put in a planning application to build their supermarket, the planners said that the site called for an extra structure on the corner. So they built this two storey office building and converted the first floor into accommodation for their workers. They then sold it on cheaply to a building firm.”
Olaf: “It’s a great property with loads of potential but you’ve got to see it. It was originally on the market for £700k and we eventually acquired it for £580k. We have inherited five student tenants who currently live in the five-bedroom en-suite HMO on the first floor. They are amazingly big rooms and it’s probably one of the best properties in Nottingham. Most of the building materials were imported from Germany, so the spec is very high. There is a heat recovery system, Schücko windows and granite floors!
“We are now half way through converting the ground floor office space into a six-bedroom HMO, all with en-suite bathrooms. We’ve also submitted a planning application to build a second storey where we will be able to create another six-bedroom HMO. In addition, it’s got a basement where you could do another two or three bedroom apartment or HMO – it’s a fantastic and bright space, nothing like a basement.”
Jacqueline: “It’s a long-term project that will probably take another year from now. But, at the end of the day, we will have 18 to 20 bedrooms generating £500 per month on average, per room which will provide us with upwards of a 20% return on investment. It’s a great building in a fantastic location.
“Interestingly, as soon as we bought it, Lidl wanted to buy it off us again. They offered us £750k but we weighed up the pros and cons – we’d be paying builders to twiddle their thumbs, we’d have to pay Capital Gains Tax and we’d lose a great property. By the time we added all of that up, there wasn’t going to be an awful lot of profit to be made by flipping the property. We went back to them and said no, we’d sell it for £850k.”
Olaf: “We didn’t hear back from Lidl until last week. They agreed to pay £850k if we got planning permission to demolish the building. But time had moved on. We’d spent upwards of £50k on the property already. It would then be three or four months before we got another property and to be honest, we would never find a property like this. For once, we bought more than just a few rotten bricks. They came back and offered £900k. We told them we would only accept £1.2m, as that is what it will be worth once completed and fully let. Needless to say, we haven’t heard from them since!”
Jacqueline: “We don’t usually buy to sell or to flip a property. For us, cash flow is king and it’s a good building. However, it is nice to know that we have a property that someone would pay a premium for. A few years ago, it seemed that we had a portfolio of white elephants! To quote the Power Team accountant – ‘a bit of a nightmare really!’ I wouldn't say that about it now."
