HMO Investment Analysis: 3 Cortleferry

Executive Summary

This property is a budget-entry renovation opportunity in the Scottish Borders. At £85,000, it offers significant potential to BRR (Buy-Refurb-Refinance) into an HMO. However, the rural location means the demand profile is different from urban Edinburgh. Success relies on high-quality finish to compete with existing stock, targeting local workers/commuters who prioritize affordability. The property is currently in poor aesthetic condition and requires significant investment in fire safety, modernization, and cosmetic renovation to meet Scottish HMO licensing standards.

Acquisition Overview

Projected Cashflow & Returns

Licensing & Compliance

In Scotland, HMO licensing is strictly enforced for 3+ unrelated individuals. This is a critical regulatory path.

• Mandatory Licence: Required (3+ occupants)
• Planning Risk: Generally low for C3->Sui Generis in rural areas, but verify local Scottish Borders Planning Dept regarding "Change of Use."

Property & Layout Analysis

Layout Recommendation:

Maintain as a 3-bed HMO. Converting the living room to a 4th bed without a proper communal space reduces tenant desirability in this specific commuter market. Keep the living room for tenant retention.

Refurbishment Plan

Strategy: High-Standard "Professional" Finish

Given the dated state (peeling wallpaper, worn floors), a "mid-to-high" cosmetic refurb is required to command the projected rent. Focus on neutral, durable finishes.

Worker Tasks (Contract Input):

• Full electrical rewire - Cost: £4,500
• Install interlinked heat/smoke alarms (LD1) - Cost: £1,200
• Strip and prep walls (removing all old wallpaper) - Cost: £1,500
• Plastering/Skimming all rooms - Cost: £2,500
• Install 3x FD30 fire doors and frames - Cost: £2,100
• New kitchen cabinetry and worktops - Cost: £3,500
• Install new appliances (integrated) - Cost: £1,800
• Full bathroom refit (new suite, tiling) - Cost: £3,500
• Painting & Decoration (neutral colours) - Cost: £2,500
• Flooring installation (LVT throughout) - Cost: £2,000
• New carpets on stairs/landing - Cost: £800
• Plumbing upgrades (boiler service/new rads) - Cost: £2,000
• External cleanup/garden maintenance - Cost: £1,000
• Deep clean - Cost: £600
• Snagging/Finishing touches - Cost: £1,000

Shopping List (Materials):

• Kitchen Units - Cost: £1,500
• Kitchen Appliances (Fridge/Freezer, Oven, Hob) - Cost: £1,200
• Bathroom Suite + Shower - Cost: £900
• Fire Doors + Hardware - Cost: £900
• LVT Flooring (All rooms) - Cost: £1,200
• Carpets (Stairs/Landing) - Cost: £400
• Paint/Primer/Preparation Materials - Cost: £500
• Electrical Sockets/Switches/Light Fittings - Cost: £600
• Double Beds + Mattresses x3 - Cost: £1,200
• Wardrobes/Desks/Chairs x3 - Cost: £900
• Curtains/Blinds - Cost: £400
• Radiators - Cost: £500
• Kitchen/Diner Table & Chairs - Cost: £400
• Fire Extinguishers/Blanket/Signs - Cost: £200
• Landscaping tools/seeds - Cost: £200

Timeline:

Weeks: 8 || Months: 2

Negotiation Points

Investment Case Summary

Short Recommendation

Proceed only with a cash offer significantly below asking price. The low entry cost is the key advantage, but rural demand is lower. High-quality renovation is mandatory for success.

Detailed Recommendation

This property is a high-yield potential project but carries execution risk due to its rural Scottish Borders location. While the purchase price (£85k) is attractive, you must account for the reality that rental demand is driven by local employment and commuting patterns, not urban professional migration. To be successful, you must offer an "all-inclusive" service (utilities/broadband/cleaning) to make the property highly attractive against local competition.

The "Cash Buyers Only" tag in the description is a major red flag—it often signals structural issues or non-standard construction. Before proceeding, invest in a detailed structural survey. If the structure is sound, this is an excellent BRR project to lock into a long-term HMO license, providing solid cash flow once stabilized. The risk of the rural market is mitigated by the low debt service requirements.

KPI Metrics