Executive Summary
This property represents a prime HMO conversion opportunity in the Stoneygate area of Leicester. The existing 6-bedroom configuration, combined with substantial reception spaces, offers the capacity to reconfigure into a high-spec 7-bedroom HMO. Situated in a high-demand rental area, this project leverages the current buy-to-HMO market dynamics, targeting working professionals and mature students.
Acquisition Overview
Strategy: Purchase using First-time buyer capital. Leverage refurbishment budget for high-end finish to command premium rents. Financing relies on an optimistic 1% interest rate assumption for initial modelling.
Projected Financial KPIs
Gross Yield (%)7.70
Net Yield (%)5.82
ROCE (%)26.4%
Monthly Cash Flow (£)2420.83
Annual Cash Flow (£)29050.00
Licensing & Compliance
- Mandatory Licence: Yes (Occupancy >5)
- Additional/Selective Licence: Likely required given Leicester City Council standards.
Status: High Compliance Requirement. The property requires full fire safety integration (LD2 standard) due to being a 3-storey building. Mandatory licensing will be triggered immediately upon occupation by 5+ unrelated individuals.
Property & Layout Analysis
Reception 1 (Ground)
Proposed Function: Bedroom 7 (Ensuite)
Pass Reception 2 (Ground)
Proposed Function: Communal Lounge
Pass Bedroom 1-6
Function: Bedrooms
Pass Capacity:
Max Compliant Occupants: 7. The proposed layout converts the existing Reception 1 into an en-suite bedroom while retaining a communal lounge via Reception 2.
Refurbishment Plan
Scope: High-end HMO finish. Essential for the Stoneygate demographic.
Worker Tasks:
- Strip out and dispose of existing kitchen/carpets - Cost: £1500
- Partition wall for new bedroom - Cost: £1200
- Plumbing for 5 new en-suites - Cost: £12500
- Full electrical rewire for HMO compliance - Cost: £6000
- Fire door installation (7 rooms + kitchen) - Cost: £4500
- Install Interlinked fire alarm system (Grade A, LD2) - Cost: £2500
- Plastering and making good throughout - Cost: £5500
- Kitchen refurbishment (new units/appliances) - Cost: £8000
- Full decoration (painting throughout) - Cost: £4000
- Installation of emergency lighting - Cost: £1200
- Fitting flooring (LVT/Carpet) - Cost: £3500
- Bathroom refits (2 communal + 5 en-suites) - Cost: £12000
- Install data cabling/Wifi boosters - Cost: £1500
- Garden landscaping - Cost: £2000
- Final snagging and deep clean - Cost: £1200
- Install thumb-turn locks and door closers - Cost: £1000
Total Estimated Cost: £69,600
Shopping List:
- Kitchen units & Worktops - Cost: £3500
- Appliances (2x ovens, 2x hobs, 2x fridges, freezer, dishwasher) - Cost: £4000
- 7x Furniture packs (beds, desks, wardrobes) - Cost: £7000
- 7x En-suite pods/sanitaryware - Cost: £8400
- Fire alarm control panel & sensors - Cost: £1800
- 7x FD30 Fire Doors & hardware - Cost: £3500
- Emergency lighting units - Cost: £800
- LVT Flooring (ground floor) - Cost: £2500
- Carpets (upper floors) - Cost: £2500
- Paint & consumables - Cost: £1500
- CCTV system - Cost: £800
- Smart TVs for rooms - Cost: £2100
- Window blinds/curtains - Cost: £1200
- Electrical fittings (sockets/switches) - Cost: £1000
- Garden furniture - Cost: £800
Timeline:
Weeks: 12 || Months: 3
Phase 1: Strip out & Partitioning || 2 weeks
Phase 2: First fix electrics & plumbing || 3 weeks
Phase 3: Plastering & Second fix || 4 weeks
Phase 4: Flooring, Decorating & Finishing || 3 weeks
Negotiation Points
EPC Rating E
The current energy performance is poor for an HMO of this size. This will require significant investment in insulation to meet future licensing standards.
Negotiation Probability: 85
Dated Features
While the home is "charming," the dated decor/wallpaper requires complete modernization to appeal to the target HMO demographic.
Negotiation Probability: 70
Refurbishment Scope
The cost of bringing the fire safety and en-suite provision up to HMO standard is significant.
Negotiation Probability: 90
Investment Case Summary
Short Recommendation
Proceed with acquisition if price can be negotiated toward £550k-£575k due to EPC/refurb costs. The property is structurally sound and location-perfect for a high-turnover HMO.
Detailed Recommendation
This is a solid, albeit capital-intensive, project. The property is in a high-demand area for professional shares. The configuration allows for an immediate increase in room count from 6 to 7. Your main risk is the EPC rating—factor in the cost of insulation upgrade to meet upcoming MEES requirements (aiming for C). The rental demand in LE2 is strong, as evidenced by comparable listings. Utilize the low down-payment strategy, but ensure your bridging or BTL finance is aligned with the HMO usage class (C4). The proximity to transport and university makes this a low-void-risk asset.
HMO · Property Analysis