HMO Investment Analysis: Wells Road, Rowley Regis

Executive Summary

The subject property at Wells Road, Rowley Regis, is a 4-bedroom terraced house. With a purchase price of £199,000, it represents a solid opportunity for an HMO conversion. While Bedroom 4 currently falls short of the national minimum size for an HMO bedroom, the layout allows for a conversion of the Dining Room into a spacious bedroom, enabling a 5-bed HMO configuration. This project is medium-risk due to the "modernisation required" status and need for full HMO compliance licensing.

Acquisition Overview

Projected Rental Income (Post-Refurb)

Projected Cashflow & Returns

Licensing & Compliance

• Mandatory Licence: Required (5 occupants).
• Additional/Selective Licence: Sandwell Council requires strict fire safety standards.

Property & Layout Analysis

Max Compliant Occupancy: 5 adults (Requires Dining Room conversion).

Refurbishment Plan

Timeline:

Weeks: 10 || Months: 2.5

Shopping List (Material Focus):

• Fire Door Set (FD30) x 6 - £1,800
• Hard-wired Interlinked Smoke Alarms - £400
• Emergency Lighting - £300
• Kitchen Units & Worktops - £3,500
• Appliances (x2 Fridge/Freezers, x2 Ovens, Hob) - £2,000
• Bathroom Suite (Shower/Toilet/Basin) x2 - £2,500
• Floor Coverings (High Traffic) - £2,000
• Furniture (5 Beds, 5 Wardrobes, 5 Desks) - £3,500
• Boiler Upgrade (High Capacity) - £2,500
• Door Thumb-turns & Hardware - £400
• Paint & Sundries - £1,000
• Carpentry & Joinery Materials - £2,000
• Electrical Sockets & Switches - £600
• Plumbing Parts & Rads - £1,500
• Lighting & Ceiling Roses - £400

Contractor Task List:

• Full electrical rewire to HMO standard - £5,000
• Plumbing in 2nd bathroom upstairs - £3,000
• Install fire doors throughout - £1,500
• Kitchen fit-out - £2,000
• Wall partition for new bedroom (Dining Room) - £1,000
• Plastering throughout - £3,000
• Floor laying (All rooms + landing) - £1,500
• Decorating - £2,000
• Fire alarm system installation & testing - £1,500
• Landscaping/Garden Tidy - £1,000
• Cleaning - £500
• Waste Removal (Old kitchen/carpets) - £800
• External lighting/Secure side gate - £500
• Window repairs/upgrades - £1,000
• Certification (EICR, Gas Safety, HMO Licensing) - £1,200

Investment Case Summary

Short Recommendation

Strong ROCE potential due to the 4-bed to 5-bed conversion opportunity. High yield prospects in the Rowley Regis market. Requires significant initial capital for compliance.

Detailed Recommendation

The property is a classic HMO BRR (Buy, Refurbish, Refinance) candidate. The existing floor plan allows for a 5th bedroom by repurposing the dining room, maximizing income. The small box room (Bedroom 4) should be repurposed as an office or storage to keep licensing simple and compliant, or minor layout tweaks could potentially bring it to code. The property is currently in "modernisation required" condition, providing a good excuse to negotiate price down from the £199k asking price due to the significant cost of fire safety and bathroom upgrades required for an HMO license. As a first-time investor, ensure you partner with a reputable builder who understands HMO safety regulations (LACORS standards), as this is non-negotiable for the license.

Negotiation Points

• Current Condition: Obvious modernisation needed (carpet, kitchen). Price reduction: £10,000.
• EPC Rating: Awaited, likely low (D/E). Investment required to improve. Price reduction: £5,000.
• Bedroom 4 Size: Fails HMO minimums. Price reduction: £5,000.

KPI Table