JLH Homes Ltd wanted to enter a new sector of serviced accommodation. We viewed many properties around the coastal town of Lancing until an estate agent introduced us to 2O Ariel Court before it came on the market.
Before the renovation of 20 Ariel Court was complete, and before we realised that Serviced Accommodation would not be a long-term plan for these apartments, a friend approached me about buying another apartment on the block at a below-market price. She had been trying to sell the flat for about a year but had no luck. I met her on site and made a cash deal on the spot which made her incredibly happy. The apartment needed a full refurb and was a mirror image of 20 Ariel, so we knew what to expect.
We had a vision to create a first class short term serviced accommodation but due to leasehold issues we decided to take on full time long term tenants who have been incredible tenants.
During the renovation, we decided not to install an en-suite as it kept the master bedroom larger for the tenants.
Since this was the second renovation in quick succession on the same block, residents were not pleased with the noise. The noise emanating from the renovation led to many complaints, even though we limited the noise to the specified working hours. We tried our best to minimise the noise, but with the concrete floors, the noise would spread terribly.
The renovation was done by my partner Liam, with aid from different tradesman at various stages. It was completed within 3 months as he was also working on another one of our larger projects at the time.
The initial purchase + construction cost was estimated at £210,000. As we had the opportunity to use Liam as a general builder on this deal, we were able to keep the costs roughly in line at a total of £209,184.
JLH Homes Ltd invested £109,184 of its own capital, with no interest on the investment as it it has full ownership. Taking into account the lower than expected income, JLH Homes Ltd earned a ROI of 1.77% pa before refinancing. The private Investor Finance was £100,000 @ 6% pa.
The full purchase and Investment Costs were £209,184, the new valuation was £230,000 – The mortgage valuation came back at £225,000.
We took out a 75% mortgage of £168,500. This returned £55,684 of the capital invested to our investors and JLH Homes Ltd.
This leaves a return on Cash Invested of almost 6% p.a. and equity of £61,500 for JLH Homes Ltd.
