I met Ryan a couple of years ago when he had just been made redundant and was living on his redundancy payout. Due to a couple of investments that had gone badly wrong for him, he had an IVA (an independent voluntary agreement – a formal agreement to repay your creditors at an amount you can afford). He was really down on his luck and struggling to know what to do. Fortunately in the good years, he had also had the foresight to invest in a couple of three bedroom semis which were rented by local families. When I met him, the income from these two houses was paying him some additional income per month, but when his redundancy money ran out, he knew he’d be in trouble unless he got another job fast.
Then, disaster struck – one of the families gave him their notice to leave the property as they were moving to be closer to their elderly parents. Ryan was going to be losing £550 per month and he knew that before he could rent out the property again, it would need some cash spending on it. He began to panic. What should he do? Spend his remaining money doing up the property to rent it out again? Sell the property in its rather sad state and get some money out of it? Or was there another answer to his dilemma?
These were the questions rolling round his head when I met him and introduced him to the idea of HMOs or Houses of Multiple Occupation. Ryan was immediately interested as he could see the potential of his house to be converted quickly and easily to a five bed HMO as it had two downstairs living rooms, three good sized bedrooms and was in an ideal location. We sat down and did the maths and worked out that he could get over £2000 per month rental income from this one house alone! Immediately we worked out a plan.
Ryan decided that he would spend the rest of his redundancy money converting the house to an HMO (about £15K), and creating high quality rooms for local professionals. We worked out a budget and spoke to a local builder who gave Ryan a fixed price for the work. Ryan also spoke to his mortgage company to check that they were fine with this new use of the property. Within a few weeks, the house was ready, and with a fair bit of trepidation Ryan started to advertise and show people around the property. Imagine my excitement when he called me to say, ‘Wendy I can’t believe it. The house is fully let. ALL the rooms are rented. I’ve calculated after paying all the bills, I’ll be making about £900 a month profit. Thank you SO much for your help!’.
Since then, Ryan has gone on to convert his other property and repeated exactly the same process. Now he doesn’t need to go back to work! With the profit he’s making from just two properties he’s financially free. As a result of his success he’s now working with other investors, helping them achieve far higher rates of return than they otherwise would have done, and making lots more money for himself. Just a few months after we met, he still has no job, but now he has a stable and growing income, and masses of hope!