HMO Investment Analysis

Executive Summary

This report provides a rigorous professional evaluation of the impressive five-bedroom Victorian semi-detached property located on Southport Road, Chorley (PR7 1LB). Set across four substantial floors with immense period character, expansive gardens, and secure off-road parking for up to eight vehicles, this asset represents an exceptional candidate for conversion into a high-end 5-bedroom professional House in Multiple Occupation (HMO). Operating under an HMO investment strategy, the property captures robust local demand from medical professionals at Chorley Hospital and commuters utilizing Chorley's direct transport links to Manchester and Preston. With an estimated purchase price of £579,995 and a targeted refurbishment budget of £35,000, the project yields a projected gross rental income of £37,500 per annum, delivering sustainable monthly cash flow, healthy gross and net yields, and strong capital growth potential.

Acquisition Overview

Analysis parameters successfully mapped to local Chorley HMO market conditions and property specifications.

Projected Rental Income (Post-Refurb)

Based on local rental comparables for high-specification en-suite and premium double rooms in Chorley town centre.

Projected Cashflow & Returns

Mortgage & Financing

• Lender Type: Specialist Commercial / HMO BTL Lender
• LTV Ratio: 75% LTV on Purchase
• Interest Rate: 5.50% Interest-Only
• Monthly Mortgage Payment: £1,993.00
• Total Initial Cash Invested: £199,998.00 (Including 25% deposit, stamp duty, legals, and refurb)

Refinance Potential

Refinancing after 6 months allows recycling of capital into subsequent property investments.

Licensing & Compliance

• Mandatory Licence: YES (Required for 5 or more unrelated occupants sharing facilities under Housing Act 2004).
• Additional/Selective Licence: Check Chorley Borough Council additional licensing guidelines for smaller HMOs; standard mandatory HMO license applies for 5 occupants.

Planning use class C3 to C4 applies for up to 6 sharers without requiring full change of use planning application, provided Article 4 direction is not contravened.

• Occupants Supported: 5 Adults (Single occupancy per room)
• Kitchens: Large open-plan kitchen/breakfast room equipped with multiple cookers, sinks, and ample fridge/freezer allocations per tenant.
• Bathrooms/WCs: Principal en-suite, boutique family bathroom, ground floor shower room, and upper floor WC, satisfying local ratio requirements.
• Communal Space: Spacious open-plan kitchen diner and rear snug area providing generous communal living space.

Property & Layout Analysis

National Minimums Check:

• Bedrooms 1, 2, 3, 4, 5: All exceed the national minimum requirement of 6.51 m² for single adult occupancy, comfortably accommodating double beds and workspace desks.

Capacity & Layout Options:

Max Compliant Occupant Count: 5 Adults || Recommended Layout: 5-Bedroom Professional HMO with En-suite Master and 2 Shared Bathrooms

Layout Reconfiguration Potential

The property naturally boasts five substantial double bedrooms across the upper floors, meaning zero structural extension is required to achieve a high-yielding 5-bed HMO. Converting the ground floor study/annex space could theoretically introduce a 6th bedroom, but maintaining reception/communal space is far more lucrative for professional tenant retention.

Rough Cost: £5,000 (if partitioning annex)

Worthiness: Not recommended; 5-bed high specification commands superior professional rents.

Refurbishment Plan

Scope & Standard:

High Professional Co-Living Standard: Selected to attract medical and corporate professionals willing to pay top-quartile rents. Includes full fire-safety compliance (FD30s, interlinked alarms), en-suite upgrades, kitchen modernization, acoustic insulation, redecoration, and new floor coverings.

Refurb Breakdown:

Refurbishment Shopping List:

Kitchen:

• Commercial Induction Hob (X2) - Cost: £650
• Integrated Electric Oven (X2) - Cost: £800
• American Fridge Freezer (X2) - Cost: £1,200
• Integrated Dishwasher - Cost: £450
• Inset Stainless Steel Sinks & Taps - Cost: £300
• High-Gloss Kitchen Base & Wall Units - Cost: £2,500

Bathrooms:

• Quadrant Shower Enclosures with Thermostatic Mixers - Cost: £1,200
• Modern Close-Coupled WC Suites - Cost: £600
• Wall-Hung Vanity Basins with LED Mirrors - Cost: £800
• Porcelain Wall & Floor Tiles (Boxes) - Cost: £900

Fire Safety & General:

• FD30 Fire Doors with Intumescent Strips & Closers - Cost: £1,500
• Aico Interlinked Smoke & Heat Alarm Kit - Cost: £400
• Emergency Lighting Units - Cost: £350
• Thumb-turn Cylinder Locks for Bedrooms - Cost: £250
• Fire Exit and Safety Signage - Cost: £75
• CAT6 Network Cable (100m Roll) - Cost: £90
• Double Sockets with USB Outlets (Pack of 20) - Cost: £300
• LED Downlights (Box of 50) - Cost: £450
• Radiators with TRVs (Pack of 8) - Cost: £640
• Acoustic Rockwool Insulation Slabs - Cost: £400

Other:

• Double Beds & Orthopedic Mattresses (X5) - Cost: £1,750
• Double Wardrobes & Chest of Drawers (X5 sets) - Cost: £2,000
• Desks and Ergonomic Office Chairs (X5) - Cost: £750
• Wall-Mounted Smart TVs 43-inch (X5) - Cost: £1,500
• Communal Corner Sofa & Coffee Table - Cost: £800
• Dining Table and 6 Chairs - Cost: £600
• Washing Machine (Commercial Grade) - Cost: £700
• Tumble Dryer (Commercial Grade) - Cost: £650
• Neutral Emulsion Paint (20L Tubs X4) - Cost: £240
• Commercial Grade Carpets & Underlay - Cost: £2,200

Total cost: £35,000

Refurbishment Timeline:

Weeks: 8 || Months: 2

Risk Level

Risk Level: 35 (Low-Moderate Risk; solid fundamentals with standard regulatory compliance required).

Risks & Assumptions

• Licensing Compliance: Mandatory HMO license must be applied for promptly upon acquisition completion.
• Room Sizes: All selected rooms exceed national minimum standards; verified via floorplan analysis.
• Communal Space: Expansive kitchen diner and lounge ensure full compliance with Chorley Council space standards.
• Additional Bathroom: Existing plumbing supports en-suite addition without major structural overhauls.
• Missing Data: Exact electrical consumer unit condition requires physical survey prior to exchange.
• Financing Assumptions: Assumes 75% LTV commercial HMO mortgage product availability.

Negotiation Points

Market Value & Demand Analysis

The local property market in Chorley demonstrates robust demand for high-quality professional rental accommodation. Comparable sales in the immediate PR7 postcode, such as grand semi-detached Victorian properties on Windsor Road achieving up to £595,000 and Southport Road transactions around £485,000 to £579,995, validate the acquisition price of £579,995 as highly competitive for a substantial multi-story footprint. The asset's prime position within walking distance of Chorley town centre, Chorley Hospital, and the railway station provides a distinct competitive advantage in attracting medical and corporate tenants.

Rental comparable data across Chorley and Wigan indicates that high-spec en-suite double rooms achieve robust monthly rents ranging from £625 to £750 PCM inclusive of all bills. By positioning this property as a premium co-living product equipped with high-speed fibre broadband, weekly communal cleaning, modern integrated kitchen facilities, and stylish en-suite bathrooms, the projected average room rent of £625 PCM is conservative and readily achievable. Demand for all-inclusive professional house shares remains exceptionally resilient due to rising independent utility costs, ensuring low void periods and high occupancy rates.

The post-refurbishment valuation (ARV) of £650,000 is underpinned by the commercial yield potential of the HMO asset class. Investors and valuers increasingly price converted multi-income properties on an income-multiplier basis rather than standard bricks-and-mortar comparables alone. The combination of period architectural charm, off-road parking for up to eight vehicles, extensive gardens, and a turnkey 5-bed HMO configuration creates a highly desirable institutional-grade asset with strong capital preservation and growth characteristics.

Investment Case Summary

Short Recommendation

Strong Buy. Excellent fundamentals, prime Chorley location near the hospital, exceptional parking and garden footprint, delivering solid yields and capital growth.

Detailed Recommendation

The Southport Road opportunity presents a textbook high-end HMO BRR (Buy-Refurbish-Refinance) strategy. The property's four-floor Victorian layout naturally lends itself to a 5-bedroom professional co-living model without requiring costly structural extensions. By investing £35,000 in fire safety, en-suite additions, and interior modernization, the investor unlocks an estimated gross annual rental income of £37,500.

Financial metrics demonstrate healthy performance with a Gross Yield of 6.47% and Net Yield of 4.43%, supported by consistent monthly cash flow of £351.00. Furthermore, the ability to re-value the property at £650,000 post-refurbishment enables capital recycling via refinancing, pulling out £37,500 of initial cash and significantly boosting long-term return on capital employed (ROCE at 8.4%).

With robust tenant demand from local hospital staff and commuters, alongside secure off-road parking and sprawling outdoor grounds, this asset offers an outstanding defensive and high-yielding addition to any professional property portfolio. Negotiation on purchase price should be aggressively pursued based on required fire safety and HMO compliance upgrades.