Spotlight on Robin Pilley, HMO investor – Part one of a four part story

by Property 118

10:52 AM, 2nd March 2011
About 8 years ago

Spotlight on Robin Pilley, HMO investor – Part one of a four part story

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Spotlight on Robin Pilley, HMO investor – Part one of a four part story

Robin Pilley invests into HMO’s (Houses in Multiple Occupation) in the Haverhill area and regularly achieves up to 16% yields, he is also a Director of CXG Property Services, which is a Letting Agents and Property Sourcing Company.  We’ve asked Robin to share his story in a four part series as these yields are so good.  This is the first article in that series.

I became a property investor just 5 years ago when I acquired a couple of ex-local council 3 and 4 bed houses as investments to supplement my pension pot.  I was a retailer at the time.  I saw the potential in letting them by the room and placed a small advert in our local newsagents, advertising rooms to rent for £75 per week.  We could have filled our first property 5 times over as in the first weekend we had over 30 calls applying to our ad.  For a 50p newsagents ad I had identified a market.

The cost of 3 bed properties was under £100,000 and with a 15% deposit our mortgage payments were approximately £300 per month and the rental income was £1,300 pm which generated a very attractive return.  I can still buy these very same properties today for between £100,000 and £120,000 and achieve rents of £1,300 to £1,600 a month.

At that time I purchased the first couple of properties with no understanding of HMO’s, Housing Benefit/Allowances, yields, fire and other regulations but I quickly recognised that property was a way in which my financial objectives could be achieved and I also had a passion for property and business.

I therefore persuaded my brother to sell our retail business of 5 years standing and put the proceeds into purchasing more property.  This enabled us to build up a joint property portfolio of 10 properties earning us £10,000 a month net of mortgage interest.  Our mortgage broker advised that with the yields we were obtaining he had a number of clients who would be interested in the model that we were developing.  Here was our new business venture staring us in the face and CXG Property Services was born.

More to follow next week………………

  1. You are herePart One
  2. Part Two
  3. Part Three
  4. Part Four



Comments

15:46 PM, 4th March 2011
About 8 years ago

Great to hear of your success, I am looking at a similar HMO investment however have found very few lenders in the market in fact only 3 with very high arrangement fees. Did you find this same problem in financing your deals?

10:47 AM, 5th March 2011
About 8 years ago

Hi Robin,

Do you include all bills at £75/week? If not, how do you work this with say 4 or five unrelated tenants?

Thanks, David

Mark Alexander

10:51 AM, 7th March 2011
About 8 years ago

Hi Deborah

I'm sure Robin will be along to comment soon enough. In the meantime, you may enjoy reading this article regarding costs of financing.

Regards

Mark

18:59 PM, 7th March 2011
About 8 years ago

Hi - I find a lot of investors erroneously overstate their return on investment by simply subtracting mortgage repayment from the rental income. What about other costs e.g insurance, letting fees, monthly management fees etc. After all these are factored, what's the rate of return?

10:57 AM, 8th March 2011
About 8 years ago

1. I thank you for your best wishes and would advise that when we started the marketplace was very different of course and arrangement fees have increased substantially and I would say unjustifiably. However on the plus side property values have also fallen and interest rates are of course at a historically low level and we have had no problems financing our deals.
I had a meeting last week with Paragon who have recently entered the HMO market and I am happy to pass our brokers details to yourself should you wish.

10:57 AM, 8th March 2011
About 8 years ago

1. Hi David. I would advise you that we do not include the bills in the £75pw, we install electric and gas meters into our properties and the tenants split the cost themselves. We find this to be a better method than allowing tenants to heat their houses for 24 hours not only does this cost our landlords money but results in condensation problems in the houses concerned.
This solution also prevents the arguments of which tenant will take on the responsibility of collecting the proportion of quarterly bills from their fellow sharers.
I can provide you with the name of the electric supplier who installs our metered box for us if this would help you.

Mark Alexander

12:51 PM, 8th March 2011
About 8 years ago

I'm also happy to refer our recommended brokers. They pay us a commission for successful business introductions which helps us to run this site.

Mark Alexander

10:10 AM, 9th March 2011
About 8 years ago

Hi Larry

I think the figure you are looking for is the cash on cash return. The 16% figure that Robin has quoted is the gross yield on value.

Cash on cash return is the rental income net of ALL costs expressed as a percentage of the cash required to make the purchase and get the property ready to let. For high yielding properties this figure increases the more that's borrowed. On the flip side, the return is then variable based upon future interest rate fluctuations.

I am interested myself to know the current cash on cash return figures based on a typical property, a typical mortgage available today, typical costs including meter conversions & meeting HMO regulations, finders fees, lender fees, legal fees, costs of furnishing etc. Reason being, I'm seriously interested in this model myself as I would like to add some high yielding properties to my own portfolio. I've never been into HMO's due to the management complexities but it would appear that Robin has this covered.

I'm quite happy to work with Robin to come up with these figures. It will also be a superb opportunity for us to test the Viability Calculators we are currently working on.

Watch this space.

Regards

Mark Alexander
Founder of Property118.com

2:18 AM, 10th March 2011
About 8 years ago

Mark - I agree fully with your comments. I think net cash ROI is the figure investors should watch i.e you want a property that is cashflow positive. It's no good having a gross return on investment of say 15% but at the end of each month after all monthly expenses, you find yourself with a cash outflow (however small) as opposed to an inflow.

Mark Alexander

10:52 AM, 10th March 2011
About 8 years ago

Hi Larry

I've analysed a property that Robin is marketing on his web-site. Cash on cash return came out at 15.53% based on a 65% LTV loan with TMW and after taking ALL costs and realistic ongoing expenses into consideration. Results predicted that breakeven cashflow is achieved if interest rates payable on the mortgage hit 14.75% (unlikely but nice to know!). I used the Number Cruncher "Viability Calculator" we are working on for this site to come up with the figures. It's not ready for launch yet but we are Beta tasting it in house. I will find a way to post the full analysis results here. It will probably be a link to a export of data into an excel spreadsheet. I just need to work out how to do it and link to it. Watch this space!

Regards

Mark

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