Episode 26 Homes Under the Hammer

You may be tempted to shy away from the property market.

People still take a risk in the auction room.

There are bargains - if you are careful.

Join us on a Homes Under The Hammer roller coaster of highs and lows.

The atmosphere in the auction room can be electric

and very infectious.

You might grab a bargain by raising your arm, nodding your head

or winking at the auctioneer.

Let's see what inspired the purchasers on today's programme.

'In Blackburn, this house might be cheap, but there are reasons.'

-LAUGHING:

-Right! Needs a bit of work.

'When I visited this house in 2007,

'I had grave concerns about its future.'

I've just found one whopping crack.

'In Derby, I find that it's easy to get caught up in details,

'whereas...'

..you've got to think about the bigger picture.

'These properties have been sold at auction.

'We'll find out who bought them when they went under the hammer.'

'I'm in Blackburn in Lancashire,

'famous for its history of textile production and its football club.

'It's an hour's drive from Manchester, Leeds or Liverpool,

'so it's perfect for commuters.'

You can't complain about transport links!

Blackburn's got a refurbished train station, a bus station close by, the M65 motorway.

However, the property I'm here to see, the auction catalogue did say was in need of refurbishment.

'I get the impression from outside that might be an understatement.

'It's a long way from being the cat's whiskers.

'I dread to imagine what's inside.'

What I haven't mentioned is the guide price -

£40,000 to £45,000.

Even for around here, that seems extraordinarily cheap. Huh.

A-herm! That might be the reason why. Look at the slope!

That's not boding well.

Apart from that, it's a nice size room.

You've got an open fire, high ceilings, a few original features.

I don't suppose many of those would stay.

Here's another thing to be sorted.

Those wonderfully old light switches indicate the electrics are probably well shot.

And the kitchen...

-LAUGHING:

-Right. Needs a bit of work(!)

But it's a good size space. It's got a fire.

That might be nice tidied up. It's big.

Hm, not a weekend's work, though, is it?

'This isn't one for the faint hearted.

'It needs to be completely gutted,

'with new windows, heating, ceilings - the lot.'

Upstairs, two bedrooms and a bathroom.

Look at the size of this bedroom!

Super-high ceilings. No wonder they've got a glitter ball.

It could almost be a dance hall.

Not what you expect in a terrace this size.

I don't think we're making the most of the space.

I noticed, on the other side, an airing cupboard.

I'd think about opening that up, taking a passageway through here,

maybe even a third bedroom.

But, much more serious than that, look at that window!

It is all over the place.

And the floor is sloping.

There is something seriously wrong with that front wall. I need to investigate.

'My worries aren't about the bathroom or the other bedroom.

'They're much more fundamental than that.

'The fabric of the house is cause for concern.

'I need to take a closer look outside.'

I've got to try to get a better handle on this.

I didn't notice these problems when I walked in.

If you take a step back... Look at that!

The window frames, the door frames.

They're all over the place. And... Ha!

Look at that crack. That's very serious.

It's unusual for a mid-terrace.

Here's some more clues. Next door, this is not the original brick.

I guess this had the same issues - subsidence at the front.

They've taken off the entire front wall and replaced it.

That is what you have to do with this property, which is going to cost you a pretty penny.

# All in all you're just a...

# 'Nother brick in the wall. #

'This is going to take more than a few bricks.

'A new roof looks like a must, along with windows and doors.

'The subsidence appears to be historic, with no new cracks

'on the repaired house next door.

'This was guided at 40,000 to 45,000, to reflect its condition.

'What does a local estate agent make

'of this "cracking" property?'

I think, primarily,

the property will be of interest to tenants.

The housing market in this area is quite subdued.

The chances of that changing in the near future are fairly remote.

'Sounds like this is best seen as a long-term investment,

'suitable for the rental market.

'How could its potential be maximised?'

The property has limited potential.

If a kitchen extension was added to create two reception rooms,

both marketability and let-ability would be significantly increased.

'So, what could the numbers be?'

'After refurbishment works have been carried out,

'I would estimate the property would sell

'for £70,000 to £75,000.'

I would anticipate a monthly rental of between £375 and £395.

'A rent of nearly £5,000 a year on a property guided at 40,000 to 45,000

'is a pretty decent return, as long as you keep renovation costs down.'

I'm a bit concerned about this property.

That subsidence, the state inside.

It's going to cost a lot to sort out so it's not one for the unwary.

Let's find out what happened when it went to auction.

'Near the end of the auction day, it was judgment time.'

Lot 128, 93 Burnley Road, Blackburn.

A vacant mid-terrace house, in need of refurbishment.

20,000? 20,000 anywhere?

20, I've got. 22, then?

22,000? 22. 24, then?

24. 26? 28?

30?

32? 34?

36? 38?

40? 40.

42?

No? It's with you at £40,000.

I'll take 1, if it helps you.

No. A half, then.

OK, £40,500. 41?

41, we've got. 41 and a half?

Shake of the head. It's with you at £41,000.

Are we all done at 41,000? I'll sell at 41,000 for the first time.

To you on my left. Second time. Third and final time. Sold to you.

Well done. Paddle number 643.

'For £41,000,

'the new owner of the rather dilapidated semi in Burnley Road

'is 29-year-old local man Ismail.

'He joined me at the property with his builder, John.'

Good to meet you both. Ismail, why did you want to buy this place?

It was a last-minute kind of thing on the auction, the final lot in Blackburn.

-Had you seen it beforehand?

-No.

-No?!

-No.

-What did you think when you walked through the door?

-It needs a full gut-out. I was expecting it.

I didn't think there'd be no mains, electric and gas.

But I'm sure we can complete it soon.

-John, your involvement is...?

-I'll be doing most of the work.

-You're Ismail's builder?

-Yes.

How does this rate, compared to the ones...?

It's not a bad one. Normally, we've got a lot to rip out beforehand.

This is "not bad"? What is your definition of "bad"?

-Er...

-No roof. No floor. No staircase.

-Yeah.

-The floor is a big plus?

-You can get upstairs without a ladder.

You're lucky to have a builder like this as opposed to one that goes, "Ooh, no. Expensive job."

# E-easy ye-ah

# I'm easy like Sunday mo-orning... #

'So, Ismail and John think this is easy.

'With help from other people they work with regularly,

'they hope to turn it round for rental in to Ismail's portfolio.'

-Tell me more about you.

-Well...

I've been in the telecommunications industry since 1996.

I do properties as an investment and rather do it in the UK than abroad.

-When did you buy your first property?

-When I was 18.

-18?!

-18 with a lot of family support. Yeah.

It's been rolling from then.

-Now you've got a reasonable sized portfolio?

-It's OK.

'Ismail's dad has been a big influence on his sideline.

'His dad has bought and sold properties for 20 years, so for Ismail it was a natural progression.

'He's been in partnership with John for a number of years.'

Talk me through what you're going to do.

Rip all the electrics out.

Rip all the plumbing out, the bathroom and kitchen.

-All new ceilings. All new windows.

-And what about the front wall?

Not much can be done.

It's finished moving so it may be a case of re-pointing it up.

Any plans to alter the internals at all?

Yeah. We've been having a look.

-But we just walked into the property...?

-Yesterday.

And saw the backyard, garden, as such, for the first time today.

-You're making it up as you go along?

-Yeah.

How much have you set aside for the work? What's the budget?

I reckon we could get it done for about £10,000 to £12,000.

'Ten to 12 grand seems remarkably little to turn this place around.

'The boys will do a lot of the work themselves, which keeps costs down.'

Another property joins Ismail's portfolio

and he doesn't seem fazed about the state it's in.

Most people would have gone, "Oh, my goodness!"

But neither he nor John thinks it's too much of a problem.

Even with a team of builders, is it really going to be possible for those sort of budgets?

You can find out later in the show.

# Floating down that old river, boy

# Leaves me feelin' good inside... #

'Back in 2007, the newly opened Sheppey crossing

'had transformed accessibility to the Isle of Sheppey in Kent,

'and provided a shot in the arm for its untapped property market.'

I've come to see the Lodge House.

Usually, lodge houses are in a park

or at the entrance to a beautiful private estate.

This one is different.

This lodge house used to belong to the cemetery right next door.

'Having a cemetery next door is not on everyone's wish list

'but this property's prospects might not be as grave as first thought.

'The house used to belong to the sexton

'and went to auction with a guide price of between £280,000 and £290,000.'

This house was constructed in the '60s.

It really is typical of that era.

There's no coving anywhere

and you get these flat-fronted thin flimsy plywood doors.

It's quite strange coming into a room like this.

You don't get the features of a Georgian or Edwardian house.

Look at this fireplace.

But what you do get is lovely big square rooms and a sense of space.

'This property's showing its age.

'In the hallway, there's a ranch style staircase

'and a kitchen which can't be described as sleek or modern.

'There's even a fluorescent tube to keep it in period.

'The utilitarian downstairs toilet is in sympathy with the '60s vibe.

'There are pluses. A fair sized garden for one - with a palm tree!'

Upstairs, we've got three bedrooms and a bathroom.

Here's the bathroom suite.

The door only opens to there.

I think it needs a layout change.

Bedroom through here - but look at that!

It goes right through to the other side of the wall

and across the bedroom ceiling.

I'm wondering if there's any more structural damage in here.

'It's worth pointing out that three bedrooms are well proportioned.

'The house is double glazed and, if I was an estate agent,

'I might be tempted to say

'the windows look out on open green areas with trees.

'They do, but there are a few head stones as well.'

Look what I've just found - one whopping crack!

I think a surveyor has been here.

You can tell by these two studs. They've measured the movement.

I would want to track down that report

before I bid for this at auction.

'Even though this might have subsidence,

'there's one reason why it still might be a cracking investment.

'But to find out what it is, we'll have to spend a penny.'

Next door to the property are these two outside toilets,

which were used by the cemetery.

This will come down, because the owner has outline planning permission

to build two semi-detached houses here.

'That doesn't mean that all the hard work will have been done for you.

'The new owner owner will have to submit plans to the Local Authority.

'The area of land where the toilets are is quite substantial.

'As the original house has cracks, maybe that should be knocked down.

'Before anyone takes a hammer to it, we need the auctioneer's hammer.

'Let's see what happened at the auction.'

Guide price is 280, 290. £250,000 start me?

£250,000 I'm bid, and I should think so, too.

At £250,000 I'm bid. 250. Five, do I see?

At £250,000... I'm amazed! I thought it would make a lot more than this.

I am selling, then, to the maiden bid at £250,000.

255, for anyone else?

At £250,000, then. The maiden bid.

For the first time at 250.

For the second time at 250.

For the third and final time at £250,000. Are you all done...?

Sold at 250,000. Your bidder's number, sir?

Thank you very much. 1-8-6-6.

'Sold to the distinguished looking gentleman in the front!

'Michael has picked up the house and valuable building land

'for the knock-down price of 250,000.

'Michael's a property developer with over 40 years' experience.

'He works with his son Matthew, and they specialise in new-builds.

'Matthew has been in partnership with his dad for seven years

'and it looks like he's a chip off the old block.'

# Son of my father

# I'm changing, rearranging into someone new

# Son of my father

# Collecting and selecting independent views... #

'The priority was checking the cracks.'

No. It's got to be 5mm.

-That's a lot of underpinning.

-It wouldn't be underpinned.

All the brickwork has to come out and be repinned,

or the house comes down.

'It's looking like subsidence, which is expensive to repair.

'Let's find out what they think of their purchase.'

Guys, congratulations!

-Michael, that was one of the quickest auctions I've seen.

-Absolutely.

-What happened?

Well, I sat there and nobody made a bid.

He said, "Start me at 250,000."

Nobody said anything, so I said, "Yes!"

I'm waiting. I'm so surprised.

The guy said, "I've never had a maiden bid before."

It went on and on and he suddenly went "bang" and it was mine!

I was so startled, I couldn't even think to put my number up.

'Michael's cool might have left him for once,

'but he is an experienced developer who has built 300 houses.'

Because the cross wall makes it easy for us...

'Michael has started to take a more hands-off approach

'and his 40-year-old son Matthew now supervises their building sites.'

Why have you followed in your father's footsteps?

I was going to do party organising. That was when I was about 17.

I was dashing around and he said, "No, don't do that.

"Come into building. It's much better being a developer."

-I don't think I really looked back.

-What happens on a day-to-day basis?

We have our own building company.

Matthew has a great depth of technical knowledge,

which I don't lay claim to.

So Matthew gets the sub-contractors on, agrees the prices with them,

he tells me how much it's going to cost, then I budget it.

Then he tells me what I CAN do it for!

He says, "No! I don't like that. We'll cut this out and do that."

Then we finish the development and put it on the market.

-And they lock me up because I upset everybody.

-That's true.

Often, do you have to march him off?

-Yes.

-Yes. Especially with purchasers.

He just says, "Do you like the house or not?"

You have to be rather nice to people.

I don't allow him often on site cos he does stomp around and...

He likes things done his way and that's not to everybody's taste.

'Michael might be the Victor Meldrew of the building trade,

'but he has a good nose for property investment.

'What are they going to do?

'Does the subsidence mean a death warrant for the house?

'Time for the boys to lay their cards on the table.'

What I want to know is what are you going to do with it?

-Knock it down.

-Are you?

-We're going to try to.

Because it has serious structural damage.

And apply to replace that one house with an identical pair

as in plots one and two.

-You're looking at four properties? Four dwellings?

-That's the idea.

-Who came up with that idea?

-Me. While he was on holiday.

-It's true.

-Are you happy about that?

-I am, actually.

He's always happy with a little bit more money.

'They have used clever designs to get one more house on the site -

'all three-bedroom properties with garages.

'They have to get their plans approved but, potentially,

'it could give them a good return on their investment.'

Michael, what are the figures? How much is it going to cost you?

As you know, we bought the site at a very advantageous figure,

a quarter of a million,

and our build costs are in the order of 300,000.

'That was back in February 2007.

'Though the returns looked mouthwatering,

'there was a long way to go.

'Six months later, when we first returned,

'not much had happened.

'That saying about "time being money" was about to come true.

'Find out how the story ends later in the show.'

'Coming up, in Derby, it's a case of "know your local market".'

Popular with students, so potential for buy-to-let is very strong.

'Three years after my first visit,

'we see if Michael and Matthew have maintained their 100% record.'

We've always come away with a profit.

'First, in Blackburn, has Ismail and John's improvised approach worked?'

-You're making it up.

-Yeah.

'Blackburn may have a Premiership football team,

'but this two-bed semi wasn't exactly in the top flight.

'It had been relegated to a dilapidated, run-down property.

'Besides some subsidence, it had wonky windows and doors,

'and was in need of support.

'For local lads Ismail and John, this was just another project.

'At £41,000, it seemed a good buy to them.'

-How does this rate, compared to the ones...?

-It's not a bad one.

Normally, we've got a lot to rip out beforehand.

This is "not bad"?

What is your definition of "bad"?

-Er...

-No roof.

-Yeah.

-No floor. No staircase.

-So the floor is a big plus?

-You can get upstairs without a ladder!

'Three months on, have they been able to knock the house into shape?

'It certainly has better symmetry from outside.'

# It's hip to be square...! #

'The old front wall has a fresh fascia of new bricks.'

We kind of started just taking everything down first

and seeing how far the problem was.

We began by ripping the plaster off to get back to brick

and see what the structure was like.

We thought, "Oh, this is too much" when it came to the staircase.

We had a new staircase and it was three inches bigger than the gap.

'Given the original state of the house, the results are amazing.

'Perhaps the kitchen is the most impressive of all.'

We refitted the whole kitchen. We've gone for the black-and-white look.

Replastered everything and tiled it.

Last time we came here, there was no kitchen at all,

so I think it's a step forward!

'With the new kitchen completed, just upstairs needed sorting out.

'The back bedroom was brought back to life.

'The master bedroom needed more straightening out.'

In this room, the floor was really low down.

We've had to jack it up about seven inches,

so you didn't fall to the corners!

Still slightly down.

Also, the window dropped down about four inches.

So we've had to rebox all those just to straighten everything up.

'So, with a level playing field, they tackled the old bathroom

'by installing a rather striking and, er, vibrant new one.

'What roles did Ismail and John take here?'

From A to Z, really!

We've both been working pretty hard on it.

From plumbing to building - everything, really.

Everything we couldn't do, we sub-contracted out.

This isn't my full-time job. I do this for fun.

We enjoy doing it. My full-time job's working in an office.

I do a few hours a week. This is all for enjoyment.

'This might not be everyone's idea of fun,

'but they both found that it was a good break from their day jobs.'

We've been working a while now together on many different projects.

We kind of get along, you know? Just get on with it.

We work really well together.

Some things we don't agree on, but it's a laugh, a fun partnership, if you will.

We both boss each other around but I get bossed around more often. We just get on with it.

'Most of the hard graft was done by Ismail and John

'but, for Ismail, this is a family project.'

Yeah, my mum, I took her on a day out to the auction.

She helped out with the decorating in the house.

She's quite good with colour, so she chose all the colours.

'That's led to a property with different shades from magnolia.

'The approach seems to have worked.'

We have tenants on a waiting list.

It's a matter of showing them round.

When they saw this, the first person said, "Yeah, we want that one."

'That's fantastic, but have they got a good deal?

'Ismail bought the house for £41,000 and has laid out £12,000 on it.

'With costs, he should have spent around 55,000 tops.

'Is this a solid investment? What do two local estate agents think?'

First impressions are

it's been refurbished, new windows, building works undertaken.

The front wall's been rebuilt, new kitchen, bathroom. Really nice.

It's been done to a good standard. It appears to be fully refurbished.

That included rebuilding the wall.

The people who bought it have done a very nice job.

It's bright, finished to a very good standard.

Kitchen's contemporary. It's light.

It'll appeal to tenants and other occupiers.

'Ultimately, rental is the name of the game,

'but how would it fare if put up for sale?'

Today, I'd expect to be asking in the mid 70s, maybe high £70,000.

I'd be looking to put it on the market in the region of £75,000

to achieve about £70,000.

'As well as being Ismail's builder, John manages his properties.

'What does he think about those resale values?'

-That's good. Sounds like a profit.

-Yeah.

-If we chose to sell.

-Yeah.

'That could be a £15,000 to £20,000 profit.

'Not bad in the current market.

'Have they got the best rental returns, though?'

Because it's been refurbished to a high standard, rent would be £375 to £395 per calendar month.

If the property was to be put up for rent, it would achieve £375 to £395 per calendar month.

Well, we just got a little bit more than that per calendar month.

£400. Yeah, they were about right.

'£400 a month or £4,800 a year

'is a whopping 9% yield.

'What would they consider to be the secret of their partnership?'

-We've got boxing gloves. We have it out at the end of the night!

-Yeah.

'When it comes to putting on the pounds and punching above its weight

'this house has turned into a knockout.'

'I'm in Derby in the east Midlands,

'less than half a mile north of the city centre.'

This is Five Lamps, a residential area of Derby

just outside the city centre.

Popular with students, so potential for buy-to-let is very strong.

The property I'm here to see could be perfect.

I fancy a drink.

HUM OF LIVELY CONVERSATION

Service is a bit slow in here!

CONVERSATION STOPS

OK, enough of the joke!

It's actually the pub here that was up for auction.

It's disused now and there's a covenant in the sale documents

that says it can't be a pub ever again.

What have we got? Three storeys, six bedrooms and this big area.

Given that it can't be a pub, what could it be?

Let's look around and find out.

'This grand building went to auction at a guide price of just £95,000.

'They may never pull another pint in here but it's not short of space.

'There's a saloon and lounge bar, a decent sized cellar.

'What you'd do with it I'm not sure.

'There's the obligatory toilet block. Very convenient.

'Then there's the accommodation area upstairs.'

Up here, you start to think of the options for converting this place.

The first floor is where the landlord lived.

Two bedrooms, living room there,

you've got a loo and a kitchen.

First option is converting this place into flats.

Not sure how many you would get out of the property.

An added complication is that this is a conservation zone.

The general state, as you can see, it's...not too structurally bad,

but in need of, definitely, some TLC.

But you've got to think about the bigger picture of what you're going to do.

Maybe that will become clear upstairs.

'You can see the potential here.

'There are lots of rooms, with plumbing in place.

'It's too big to be a single house, it can't be a pub,

'so I reckon it's fairly obvious what to do with this property.'

Up here, we've got four bedrooms. A decent size one there.

Very large landing, which is a waste of space.

That you couldn't call a bedroom. More like a cupboard.

It's a stud partition wall so you could get rid of that.

This part, reasonable size.

Low ceilings, but great potential.

Up here, it's starting to become clear.

The way to make most money is as an HMO, a house of multiple occupation.

Two bedrooms downstairs, four bedrooms here.

On the ground floor, potential for two bedrooms. Six, seven, eight?

That size of property is going to generate a humungous potential rental income.

'If you do rent to multiple occupants,

'there are regulations on everything from fire safety

'to the number of bathrooms and kitchens.

'This will add to the cost of conversion.

'What does the auctioneer who sold it

'think is the best option for this old pub?'

The obvious use is residential.

It's too large for a single residence.

It wouldn't fit that requirement.

There's no garden.

I think its obvious use, assuming planning, is as a shared house.

'As a shared house, what could the rental income be?'

If you let it out as rooms, assuming fully furnished and serviced,

you'd be charging in the order of £55 to £65 per room per week.

'If the let is to students, there's only a nine-month occupancy.

'If you had up to eight rooms, that could net £17,000 a year,

'a fantastic yield if you got it for around that £95,000 guide price

'and kept your costs down.'

Its value will depend on how much it can earn for you.

Assuming that you got full rental yield from this,

I can foresee that, ultimately, its value will be towards £250,000.

'If you could achieve those returns, it might mean drinks all round.'

It looks like last orders at the Masons' Arms.

I reckon this has potential as a great investment.

Convert those rooms, rent out to students, could make a lot of money.

Before that, a lot of work and that all important planning permission.

For now...

it's time, gentlemen, please, for the auction.

Cheers.

Round the corner on Edward Street

you'll find the Masons' Arms, lot 17 today.

Very imposing and spacious three-storey former pub.

£100,000? 100?

100 I have, thank you. At 102, somewhere else?

102 is bid. 104.

106?

108. 108. 110?

Ten. 110 is bid.

At 110. 12, quickly?

At 112. 112. 114.

116. 118.

120. 122.

124. 124.

Five. Six.

126. 127?

£126,000 is bid.

Seven, quickly? At 126,000, then. Going once.

Going twice. Third opportunity. Any higher bid? £126,000...

It's yours, sir. Sold at 126.

'And, for what seems to me to be a pretty reasonable price of 126,000,

'the Masons' Arms is in the hands of father and son Danny and George,

'who immediately saw its potential.'

Danny, George, nice to meet you. Are you going to get the drink in?

-It's a while since it's been used as a pub.

-Yeah.

-Tell me about what's happening.

-This, if all goes according to plan, will be student accommodation.

OK. Well, they'll love THAT! You're keeping the bar, I hope.

We did think about it but I think we'll have to lose it.

'With or without a bar, this is the best approach

'to maximise returns here.

'Moving into the student let market and converting a building into an HMO is complicated.

'Alarm bells are ringing. I was keen to know what experience they had.'

We owned a business, which we sold in October.

-What kind of business?

-Tour operator.

-Holidays?

We specialised in sports tours. We were bought out by a large operator.

As part of that, it allowed us to generate some capital,

which gave us investment funds to move forward with.

What better way than a large project that needs everything doing to it

-in a short time scale?

-In at the deep end!

-We don't live a conventional life.

-No.

-We like a challenge on the go.

What have you taken on in the past?

Well! Prior to the tour operator, running a hotel in the West Country.

Prior to that, running the business we set up in Derby converting...

an old building we converted into a hotel.

What did you say the first time Danny said, "Dad, I've got an idea"?

I think you know I'm made now!

It was just, "Here we go again."

'Dad George has a quarter of the investment.

'His role will be clearance and making tea.

'Danny plans to get his hands dirty and will also project manage.

'I was intrigued to know what he felt was the biggest challenge.'

Hitting the completion time. If we don't, we'll have a year of not generating rental income.

-The clock is ticking.

-Yeah.

The sooner we get started, we turn this around.

Chris our architect has drawn some plans for us fairly quickly.

As soon as we've got the green light we'll get in here and get started.

'It sounds like I need to speak to the architect

'to find out exactly what the plans are.'

Chris, you've got the job of turning this place around.

Where do you start? What are your plans?

The plans are to keep the ground floor as it is,

but restoring the hall to its previous form.

We'll keep the lounge.

We're converting the main bar into a kitchen and dining room.

We've got a utility room so they can do their washing.

Outside, we hope they'll recycle, and we've got a herb garden.

-A herb garden?!

-That's right. A herb garden.

-What kind of herbs?

-We don't say!

Upstairs, we're more or less keeping the layout as is.

We've got to put extra bathrooms in,

it's a house of multiple occupation,

so we're using the landing.

-In terms of major building works?

-There's not a lot.

'Chris thinks the work can be done for around £50,000.

'It looks straightforward,

'but they need to get change of use planning permission and building regulations sorted.

'I think this could be tight.'

You've got seven months until the new university term.

-What happens if you miss the deadline?

-Then it's Plan B.

-Plan B is what?

-Is in development.

No, Plan B would be we'd have to continue to market the property.

It doesn't mean students aren't going to be looking for property.

'Danny's right. They may have a second chance.

'But it's the first round of student intake that would be most lucrative for them.'

Danny and George, doing exactly the right thing

converting this into a student let.

The potential returns are huge.

But that depends on getting it finished in time for the start of the university term.

Will they do it? Find out later in the show.

Did our buyers have their eyes wide open when they made those bids?

Or were they blind to the pitfalls?

Let's see how clear their vision was.

'In February 2007,

'we first saw what looked like a straightforward property,

'a lodge house built for the caretaker of the cemetery.

'It needed renovation and came with a plot of land

'and outline planning permission to build two semi-detached houses.

'Experienced developers Michael and Matthew, father and son,

'had more ambitious plans.'

We will contemplate knocking the house down

because it has serious structural damage,

and apply to replace that one house with an identical pair

as in plots one and two.

-You're looking at four properties, four dwellings?

-That's the idea.

'So, it was four new-builds instead of two.

'When we went back nine months later, it wasn't going to plan.'

# What a good year for the roses

# Many blooms still linger there... #

'The only thing that had emerged from the ground was a rose bush.

'There were no houses, garages or bedrooms.'

What has happened happens all the time

to all developers whenever you put in a planning application.

We haven't lost time because we've been inefficient, it's the way the system works.

'Now, nearly three years after they bought the house,

'toilet block and land, are they flushed with success?

'Yes! At last! The four properties are built

'and are now being lived in.

'To get to this stage, they had to compromise, as Matthew explains.'

Well, er...a smallish kitchen.

One I'd have liked to have made larger.

Unfortunately, we wanted to give it another eight inches that way.

The planners said, "No, you can't have it," because they want to make bigger garages.

We had to bring this wall back in, I think seven or eight inches.

It's made a smaller kitchen.

Still a nice kitchen, but it's not what we wanted.

'They didn't get the kitchen they wanted,

'but did get three bedrooms, with the master being en suite.

'What's their overall view of this project?'

It's been difficult.

But not too bad.

We have sold them.

It's been one of those things, the last year and a half.

The lucky thing was we had four developments on prior to the crunch,

and we saw it, it obviously was going to happen.

So we sold everything. The only four we had were these four houses.

We thought we were going to sell them on the market at 190,

sell them for 185.

Well, we sold one at 145 and two at 135.

So we've made a loss.

'They put the fourth house into an auction and sold it for 135,000.

'The result has been a first for Michael, and not a good one,

'after over 40 years in the industry.'

# Well, I'm seeing things for the first time

# In my life

# In my life. #

The first development, which is tiny, thank God, where we've lost money.

We've always come away with a profit, until this time.

£40,000 we've had to write off.

'This wasn't the deal they initially hoped it would be,

'but they'll recoup their losses on other projects.

'With teamwork, they achieved their goal of building four properties.'

Matthew is very deeply knowledgeable in construction.

-Money's MY thing.

-Dad stays in the office. I go out in the rain.

-And do the hard work.

-There is a bit of that!

-I'm being cheeky.

That's the way it works.

'They may have complementary skills, but they're also father and son.

'Surely, that causes friction at times.'

MUSIC: "Son Of My Father" by Chicory Tip

Sometimes, it all works fine and sometimes we argue.

It works quite well. It's fun.

-We have some hellish arguments but, on the other hand, it all turns out right in the end.

-Yeah.

'Perhaps Matthew should have said, "NORMALLY turns out OK in the end."

'Did they cut their losses and run at the right time?

'They sold two of the houses at 135,000.

'Was that a rash decision?

'Could they have held out for more? What do local estate agents think?'

It's finished to a high standard.

The kitchen could have been a bit bigger.

A really nice property in a nice location.

I wasn't too keen on the look of the outside.

I'm pleasantly surprised at the internal side. Very nicely laid out.

'Generally favourable comments,

'but could they get more than the 135,000 they sold some of them for?'

I'd put this property on the market for offers of £140,000 to £145,000.

We could put this on for £140,000 to £145,000.

So we appear to have done the right thing.

I'm happy with what's happened. I agree that would be the right price.

'They're probably right, but they might have got a little bit more.

'Do they regret buying it in the first place?'

If there hadn't been the banking collapse,

this would have been a diamond development.

And it still is.

-It's a nice property.

-Oh, yes.

-And we got compliments.

-Absolutely.

You could still bring people here and say, "We did that."

-And they'd say, "Gosh. Pretty good."

-Be proud of it. I am.

'Now there are four houses where there was once only one.

'We hope, with an improving market, they'll have more luck next time.'

'Back in Derby, with the last pint pulled

'and a covenant in the deeds preventing its future use as a pub,

'it was last orders at the Masons' Arms.

'The building was too big for a single house.

'Local father and son Danny and George set their sight on a different market.'

# We are young, we run green Keep our teeth nice and clean

# See our friends, see the sights Feel all right... #

This, if all goes according to plan, will be student accommodation.

-They'll love THAT.

-Yeah.

'The clock was ticking and they had six months to get it ready

'for the first student arrivals.

'11 months on, did they do it?

'The outside is completely finished, with new windows, doors and roof.

'Inside, there are great new living spaces in what was the bar area.

'Danny managed to sell the bar to a friend, so it didn't go to waste.

'This whole floor is a communal area

'with living rooms, dining room and kitchen.'

This is the back end of the bar area.

Under the Housing for Multiple Occupation licence we've had to put two of all appliances in.

Two ovens, two hoods, two burner rings.

We've got the space to put two fridges in.

In the utility room, we have plumbing for two washing machines and a tumble drier.

-'This is looking like better student accommodation than

-I

-remember.

'With eight bedrooms and three bathrooms,

'it meets current regulations for HMOs,

'houses of multiple occupancy.

'We seem to be lacking one small detail. Where are the students?

'Did the boys meet their deadline?'

No, we didn't.

But it's not a problem.

Derby University have 158 courses starting in January.

We're now in the position where we can go for the November sign-ups

to move in in January.

'It's not too much of a disaster, and the refurbishment's gone well.

'While Danny looked after things and did a lot of work himself,

'his dad, who has a quarter share, was kept fairly busy, too.'

My dad's played an important role.

He's not been involved in building work but he's been key for support.

He's helped with administration, the bill paying,

clearing the rubbish and keeping us motivated.

He's used his car to do about 150 tip runs!

We now call his car the "skip with wheels".

'With old carpet, furniture, fixture and fittings to remove,

'George must have been a regular at the dump.

'But it was just a start of bringing architect Chris's plans to life.

-'Is he happy with the result?'

-Very pleased.

The students are going to have a fantastic time.

'I'm sure they will, even without the bar!

'Student digs in a pub? How cool is that?'

The challenge wasn't for me.

It was for Danny to get it done to a very high standard and produce this fantastic building.

'To get the high quality finish

'with the fitted kitchen and three bathrooms wasn't going to be cheap.'

Initial budget was about £50,000.

Early on, we brought in extra finance to do everything we needed to.

We raised the budget to 75,000 and pretty much came in on budget.

'With that £75,000 spend on a building

'they bought for 126,000,

'Danny and George have committed just over £200,000.

'So, has it been a worthwhile investment?

'What do two local property experts think?'

Transformed completely. I saw it as it was.

You wouldn't recognise it as the same place. A fantastic job.

This house is going to appeal to students in a very big way.

They can walk into town, or walk the other way to the university.

Almost equidistant. Perfect.

They've organised it very well. A lot of rooms have been divided.

Good living accommodation downstairs. Bedrooms are OK.

Not over-sized, but adequate for the purpose.

'It might fit the bill for students,

'but will it pay the bills for Danny and George's £200,000 investment?'

On fully serviced room accommodation like this the going rate is around £75 to £80 a week.

That's achievable. Not over a full 52-week year. It's a bit truncated.

I'm sure it's what they'll achieve.

If the property were rented out, individual rooms,

they would make around £80 a week, £640 a month, about £30,000 a year.

That's pretty much what we budgeted. £80 inclusive of bills. Very happy with that.

'£30,000 a year would be a fantastic return,

'representing a massive 15% yield.

'This high rental income should also mean a healthy resale value.'

Based on a rental return between £30,000 and £32,000 a year,

this will have a market value of between £300,000 and £320,000.

Around the £300,000 mark.

I think it's difficult to put a value on the commercial property.

That sounds very interesting at this stage.

'With a potential £100,000 profit, if sold,

'and a tremendous rental return, it is time for drinks on the house.

'How will Danny cope with his lovely property being occupied by students,

'not always careful tenants?'

As long as everything's in order with deposits, I don't mind.

I was a student once. They've got to work hard and play hard.

I should be a good landlord, fairly understanding.

'And if student days are the best years of your life,

'what better way to spend them than in accommodation to match?'

Join us for lots more auction action on Homes Under The Hammer.

See you then. Goodbye.

Subtitles by Red Bee Media Ltd