HMO Investment Analysis: 48 Coombe Road, CR0 5SG
This analysis evaluates the conversion of a 2-bed maisonette into a high-yielding 3-bed HMO. Investment criteria: First-time buyer, £40,000 down payment, 3% bank fee, 1% interest rate assumption.
Executive Summary
This property is a basement maisonette situated within a semi-detached building. While marketed as a 2-bed, the expansive Kitchen/Lounge (approx. 26.8m²) offers a unique opportunity to reconfigure into a 3-bed HMO without compromising communal standards. The location is excellent for commuters, being within walking distance of East Croydon and South Croydon stations. Key risks center on basement damp management and mandatory licensing requirements in Croydon.
Acquisition Overview
Total Capital Invested
£63,000
Interest Rate (Assumed)
1%
Note: 1% interest rate used as per provided parameters. Market rates are significantly higher and investors should model for 6%+ for prudent cashflow forecasting.
Projected Rental Income (Post-Refurb)
Bed 3 (Double/Single)
£850
Total projected Gross Annual Rent: £30,600. Based on comparable double room rents in the CR0 area (avg £800-£950).
Projected Cashflow & Returns
The ROCE of 35.5% is highly attractive, driven by the low purchase price relative to potential HMO rental income.
Licensing & Compliance
- Mandatory Licence: No (Less than 5 occupants).
- Additional/Selective Licence: Likely (Croydon has strict additional licensing for 3+ sharers).
Compliance is critical. You must apply for a Property Licence for a 3-bed HMO in Croydon. Ensure Fire Safety (FD30 doors, interlinked smoke detectors) is installed to certification standards.
Amenity Standards Check (For 3-Bed HMO):
- Occupants Supported: 3
- Kitchens: Sufficient shared cupboard/fridge space for 3.
- Bathrooms/WCs: 1 Bathroom shared between 3 is acceptable under most standards but tight; consider adding a WC.
- Communal Space: Kitchen/Lounge (26m²) well exceeds minimums.
Property & Layout Analysis
Kitchen/Lounge
6.4m x 4.2m
Communal SpaceBedroom 1
4.2m x 3.0m
BedroomBedroom 2
4.2m x 2.3m
BedroomNew Room (Partition)
Est 3.0m x 2.5m
Proposed Max Compliant Occupant Count: 3
Recommended Layout: Retain original Bedroom 1 & 2. Partition a 7.5m² section of the Kitchen/Lounge to create a 3rd compliant bedroom. The remaining 19m² provides a comfortable combined Kitchen/Lounge.
Refurbishment Plan
Scope:
Targeting "Medium" standard. High enough to attract young professionals, durable enough for HMO wear and tear.
Refurb Breakdown (Estimated):
Stud wall construction£1,800
Fire safety upgrades (Doors/Alarms)£2,500
Kitchen/Living reconfig£3,500
Flooring & Decor£2,500
Furniture & Appliances£3,000
Contingency£1,700
Total Estimated£15,000
Shopping List (Top 15):
- Fire Door (FD30) - 3 units
- Interlinked Smoke/Heat Alarms
- Stud Partitioning Timber/Plasterboard
- Bedroom Furniture (Beds/Desks/Wardrobes) - 3 sets
- Additional Fridge Freezer (Capacity)
- Kitchen Cabinets (Extend existing)
- Smart Locks / Thumb-turns
- Emergency Lighting (Main hallway)
- Paint (Hard-wearing/Washable)
- Lighting (LED Downlights)
- Carpets/Laminate for new bedroom
- Window blinds (Fire resistant)
- Extractor Fan (Kitchen/Bathroom upgrade)
- Skirting boards/Architraves
- Electrical Sockets (Double with USB) - 6 units
Refurbishment Timeline:
Weeks: 4 || Months: 1
Phase 1: Planning & Materials Procurement || 1 week
Phase 2: Structural (Partitioning & First Fix Electric) || 1 week
Phase 3: Decorating & Second Fix || 1 week
Phase 4: Furnishing & Snagging || 1 week
Risks & Assumptions
- Basement Damp: High risk in basement maisonettes; must inspect for mould before commitment.
- Licensing: Requires verification of specific Croydon Additional Licensing conditions for current year.
- Structural Walls: Assumed partition wall is non-load bearing.
- Planning: Article 4 risk; must confirm if property is C3/C4 change of use compatible.
Negotiation Points
Basement/Damp Condition
Visually inspecting the photos, the basement nature increases the risk of damp. Use this for a £5k-£10k reduction.
Probability: 85
EPC Rating D
The property is a basement maisonette with an EPC D rating. This limits energy efficiency and may require upgrades for compliance/tenant comfort.
Probability: 60
Auction/Listing Pressure
The listing mentions "GOTO Online Auction," suggesting a motivated seller wanting a quick exit.
Probability: 75
Market Value & Demand Analysis
The Croydon market is exceptionally strong for HMOs due to the "East Croydon" transport hub factor. Commuters from Gatwick and Central London create a consistent demand for high-quality, furnished rooms. The competition for rooms at the £800-£900 mark is aggressive, with most listings being filled within days. The proximity to transport (10-15 mins walk) makes this highly attractive to the professional demographic targeted. The lack of supply of high-spec 3-bed HMOs in this specific pocket of Coombe Road/South Croydon creates a strong niche opportunity.
Investment Case Summary
Short Recommendation
Strong buy, provided the basement damp assessment is clear. The conversion to a 3-bed HMO utilizes the floor space perfectly, yielding a very high ROCE. Move quickly given the auction status.
Detailed Recommendation
This is a classic "HMO conversion" project. The footprint allows for a 3rd room without turning the place into a cupboard. The basement configuration is a specific risk, so a comprehensive survey is mandatory. If the survey comes back clean, this deal is a winner due to the yield potential. Ensure you have the budget for full fire safety compliance (FD30s, etc.) as the council will be strict on basement level properties. Financially, the 1% mortgage assumption is very generous; even at 6%, the deal remains highly profitable. Negotiate hard on the basis of the "basement" and "auction" distress factors.
HMO · Property Analysis