Flora Street Development Case Study - Student Property

The Property

As buy-to-let locations go, you aren't going to get much better than this development. Set in the heart of studentville in Cathays, this student property oozed potential. Flora Street is a mere 10 minutes walk, crawl, or stumble away from Cardiff University's Cathays Park Campus. It is in a prime location, close to all the student bars, Cardiff Students' Union, lectures, shops and important take-aways.

Originally the property had just two double bedrooms, two large reception rooms, and a very spacious bathroom. Set over two stories with a rear garden, the property had plenty of space to play with.

The Big Idea

The property was initially bought for £150,000 in February 2012. The aim was to double its value in both selling potential and income via rent. This would take a substantial cash investment and commitment to the cause - this is a major property redevelopment project, but with a big profitable outcome.

CPS Homes are familiar with such property development projects. Having completed many successful projects such as this for over a decade, our trained eye quickly saw the redevelopment potential.

Initially checking over the property, we saw it had an abundance of space to work with, and in fact could be turned from a spacious two bedroom into a first class 8 bedroom shared property. CPS Homes takes pride in our relationship with Cardiff Council, aiming to be the market leader in buy-to-let HMO properties. Considering all the mandatory licensable House of Multiple Occupancy (HMO)regulations, the property would meet the Council's standards with ease. This was supported by the fact that CPS Homes officially manages the most HMO properties in Cardiff - meaning this landlord was 100% in the right hands.

Property Assessment

During this phase of the project it is vital to get the client on board, sharing the vision of the property's potential. To paint the picture, CPS Homes presented a full property assessment, highlighting what work was to be done: where, when, why and importantly, for how much. It is important to get accurate costs for such a project right from the beginning, so we provided two quotes to the client so they knew what every penny was being spent on. In addition to the plan and quotes, interior decoration examples were provided, highlighting how this redevelopment would turn this property into a sought-after modern pad, envied by jealous friends.

The property was bought in February 2012. By then many students had already sorted their digs for the next university year, so planning had to be agreed pretty quickly. Once all the important behind-the-scenes tasks were sorted, such as planning permissions and the landlord finding the right financial advice, we saw potential for the property to be rented through the summer. The redevelopment project was given 4 months to complete. By June all works should be completed ready for the lucky 8 tenants to move in July time. The timeframes were a good fit for getting everything done and dusted ready for summer rent.

We also gave the landlord before and after values of the property to show how big the piggy bank can grow following redevelopment. The client was extremely impressed with the planning assessment, and with a green light on the funds, the ball started rolling on the redevelopment.

Let the Building Commence

The aim was to make this property an 8-bed rental that would leave other students jealous, wishing they could live there. The days of students living in squalor are gone; this student pad would demonstrate that student living can be modern and of a high standard.

The house was completely emptied and gutted out. The work was set to take four long months and required a committed investment. But the targeted result of £2000 per calendar month rent made this worthwhile.

The new kitchen has the wow factor. With 8 hungry mouths to feed, the kitchen needed plenty of space and appliances to share. Set in a modern style open plan lounge and kitchen, it was decorated with a modern finish, combined with laminated flooring and tiled kitchen walls. Complete with two gas cookers, two stainless steel sinks and kitted out with plenty of modern white cupboards, topped off with wooden worktops - this kitchen adds instant value.

The living room is the cherry on top. The room comes with a large corner sofa fit for 8 kings or queens to lounge away on those hard uni days. Television is a cornerstone of a healthy student house. With this in mind the living room now comes complete with a modern 50inch wall mounted TV. Also the sofa is just a short walk to the kitchen for those really lazy days! A modern finish to the living room leaves this open plan lounge and kitchen a major selling point, worth every penny in investment.

As the property was completely gutted out, it means the refurbished bedrooms also boast high quality. The end result was 8 double bedrooms, all with matching new furniture. So, when it comes to the crunch and students really have to get down and study, the rooms are designed with comfort in mind, making the private space ideal for attacking the books - or Facebook!

Results

Having been a market leader for over a decade, CPS Homes are 100% confident in our abilities, and when committed, the results will come - as they did here. The project finished on time and within budget, as promised in the beginning. The workman even had time for a few cups of tea.

Before work commenced the house was in a worse state and potential of being used as a spacious two bedroom property, only bringing in £625 per calendar month or £7,500 a year.

Work then commenced in February 2012 and finished on time in early June. With the newly developed selling points of the property, it was quickly let out at the start of July as a new eight bed property at £2,400 per calendar month, or £28,800 a year. The monthly rent was above the targeted £2000 set in the assessment plan.

So, from 2011 to 2012 the rent was increased by £1,775 a month, or £21,300 a year, that's a 74% increase! This means in just over two years the redevelopment costs will be covered, leaving years 3+ to bring in a £27,600 income per year.

The house was bought for £150,000 back in February 2012; the value after the completed redevelopment was £325,000. In addition to the £50,000 invested in development costs, the property has the potential to make a selling profit of £125,000. Not a bad return in less than one year. However the landlord has chosen to rent this property making good annual profit in a property that is built for longevity.