Episode 54 Homes Under the Hammer

Home is where the heart is, they say, but is your heart in making money from property?

On today's programme we'll be finding out who's willing to put their heart and soul

into buying property under the hammer.

Buying property at auction can be a road to success,

but there are some pitfalls, so it's important to tread carefully.

Even experienced developers can make wrong moves,

so let's see what tempted our buyers on today's show.

In Whitehaven, Cumbria, there was a property at a decent price and in sound condition.

All in all, a big tick.

In Mitcham, Surrey, I discover what really goes on behind closed doors.

Of course! It's the bathroom!

And will the refurbishment of this terraced, three-storey Derby house be a piece of cake?

Toasted tea cake?

All of these properties have been sold at auction. We'll find out who bought them and what they paid

when they went under the hammer.

Today I'm in Whitehaven, a small town and port on the coast of Cumbria.

And this is its magnificent harbour.

But it's been through ups and downs over the years, losing out to bigger ports such as Liverpool and Bristol.

But thanks to the Millennium Project and £1.3 million of cash,

it's looking jolly spiffing these days.

# So lead me to the harbour... #

In its heyday, Whitehaven was a grand, bustling port

so it's great to see it getting back on its feet.

# ..and float me on the way... #

But will the property I'm here to see be just as impressive?

Not far from the centre of Whitehaven is the property.

This is it. A three-bed ex-council property. And the guide price? 20,000 quid.

Definitely worth a look!

'OK, it's not quite as grand as the townhouses in the port,

'but at that price it's got to be worth checking out.'

So what have we got? Stairs up the bedrooms there

and through into the lounge. Not a bad size. And the carpet's in decent condition.

That's always a good sign. It's been hoovered.

The room itself, well, clearly in need of a bit of modernisation.

The fireplace, for sure. But not a bad size. Similarly, the kitchen.

It obviously would really benefit from some money spent, new units, but it's a nice size.

Big enough for a kitchen table or a dining table there.

And a few... Good news. That's a reasonable size boiler, reasonably new.

And behind here, not a cupboard, but a downstairs loo. Well, that's great.

You can never have too many loos. All in all, bit of a big tick.

'It's great to have that loo in addition to the one upstairs,

'but that's housed in a rather odd flying side extension above the drive.

'And the pink suite and wooden finish give it a really dated look.'

# It's understood They got hardboard I got solid wood... #

This is really unusual. It's almost like a flying bathroom.

It's actually constructed above the driveway below.

It's a very odd little room. I'm not sure I like it, but it is upstairs.

Then onto this second landing area you've got three bedrooms - one at the front, two at the back.

Not bad sizes. It feels like it definitely needs just smartening up.

But in terms of space, you can't knock it.

A perfectly fine little property here and it gets even more tempting when you go out the back.

At the rear of the property, a really good-sized garden.

Much more exciting for me, I think, is the potential to extend.

Look what's happening next door. They have a single-storey extension

and the property next door looks like it's having something similar.

So the planners are up for that. I don't think you'd even need planning permission.

It's something this property would benefit from enormously.

So potential to build out the back, but getting rid of that floating toilet could be trickier.

On closer inspection, it looks like there's evidence of the dreaded A word in its construction -

asbestos. You'd need to get expert advice before doing any major work here,

but this place could have a lot of potential at that £20,000 guide price.

But what does a local expert think?

We asked along the auctioneer to give us his thoughts.

The property's in need of modernisation and would benefit from new kitchen, new bathroom,

floor coverings, heating etc, and decorated throughout.

The negatives to this property might be the amount of money you'd need to spend on it

to get it to a resale standard.

There is a ceiling to resale values of properties of this nature in this area.

So the cost of improvements doesn't always equal increased value.

With a ceiling on the resale value, it's important to keep costs under control,

but once the renovation's done, what could it sell for?

Once this property has been refurbished to a high standard,

you would probably achieve between £55,000 and £60,000.

What if the buyer decided to let it?

I think once this property has been refurbished, it would achieve £375 per calendar month.

So not a bad property at all. And it's good news that there's building of new houses nearby.

Always a good sign. So let's see who fancied it when it went under the hammer.

Lot 29. Right, £20,000.

20 I've got. £20,000.

22 I've got. 24, sir. 26. 28, sir.

It's against you. 28 I've got.

-29.

-29. 30. 31.

31 and a half. 32. 33?

32,000. You're out on the phone. It's with you at 32,000.

At £32,000 for the first time. 32 and a half.

33. And a half.

It's against you on the phone. You're out, you're out, you're out. Not wanting you back in.

At £33,000 for the first time.

At £33,000 for the second time.

At £33,000, third and final time. Well done.

Persistence finally paid off and the property sold for £33,000 to father and son, Rob and Daniel.

Dad Rob is a quantity surveyor and this is his first property venture with his son, Daniel.

I caught up with them back at the house to hear about their plans.

# Follow me I've found somewhere to go

# Follow me We'll be happy there I know... #

-Rob, Daniel, good to meet you both. Congratulations.

-Thank you.

-A lot of house for the money.

We thought that. Obviously, being a semi-detached and three bedrooms,

-£33,000, can't go wrong.

-Tell me why you've bought it.

Daniel, is this to do with you?

It's my first renovation project. My dad's done a couple before,

but it's me getting on the market with him. A joint investment.

-A joint investment?

-Yeah.

-Fantastic. And what will your involvement be?

-Learning how to do up places?

-He knows a lot of trades and I just want to learn a couple.

So what are you doing at the moment?

-I'm an apprentice fitter.

-OK.

-So I'm just learning my trade so I might as well invest my money.

Daniel's just 18, but it seems as though he's got a wise head on his shoulders.

There aren't many teenagers who put their savings into property.

So now they've bought the house, what work are they planning to do?

It basically needs a full modernisation.

-Kitchen, bathroom...

-Oh, yeah.

What about the infrastructure of the house itself? Major changes?

Well, that little lean-to thing on the outside looks a bit odd.

I don't know who has designed that, but I think that was added on at some point.

-The flying toilet?

-Someone had a bad day at the design office when they added that on.

It obviously joins the two properties and a lot of them have actually been taken down.

But unfortunately this one, because it's a council property next door,

-I don't think we can take it down.

-Right. So it's going to have to stay.

-Yeah, unfortunately.

-Looks like asbestos as well.

-I met with the site manager and spoke to him about it.

He says it's definitely asbestos. You can basically cover over it, but personally I'd like rid of it.

There's a stigma to asbestos.

Rob is right to identify asbestos as a potential problem if it's disturbed.

The inhalation of asbestos fibres can cause serious lung conditions, even cancer. To render it safe,

he could have it sealed up or removed totally by a specialist.

-What's the budget for the work you're planning?

-Well, having been round today,

I'd like to spend, between us, ten grand, but it might stretch to 15.

With the guide price and the money we bought it for reflects the amount of work that needs done.

So I think if we're in it for 50 grand, we should be able to make 10, 15 grand off it.

-What about timescale for the work?

-Think of a number - six months, nine months.

That sounds a lot, but if we get a lot of tradesmen in to do it, we'll do it in six months.

If we do a lot of work ourselves, it'll be longer, probably 9 months.

It's an elastic timeframe, but they don't seem stressed about it.

They were fairly relaxed before the auction, too,

as they hadn't even looked around the property. Tut tut!

Why didn't you look at it?

Well, I actually know the area a little bit. I work round the corner and I thought

I know the houses, I know they're solid. Front garden, off-street parking.

The rear garden is quite reasonable. We've got three bedrooms. I thought it had to be one to go for.

It was one of those things where you think, "It's cheap."

-And were you happy to throw your money in?

-Otherwise, it would just burn a hole in my pocket!

I'd spend it on nothing!

Well, if you're going to take a punt on property, go for something fairly cheap with lots of potential.

And this place ticks both boxes.

-We look forward to seeing how you get on.

-Yep.

-And we'll be back in a few months to see.

-Hopefully!

-Congratulations.

-Cheers, Martin.

It seems the flying bathroom will have to stay, but for Rob and Daniel a great first joint project.

How are they going to get on? Find out later in the show.

This is Mitcham in Surrey. It has fantastic transport links into the city

and from here you can be in London Victoria in just 20 minutes.

It also boasts lots of lovely green spaces, Mitcham Common being a fantastic example.

Still it's hard to believe it was once famous for its lavender fields.

It became known for its soothing air and Londoners trying to escape the plague moved here in droves.

Amazingly, the area was the global leader in lavender production until the end of the Victorian era,

which is incredible. Hopefully, the auction property I'm here to see will be sweet-smelling,

but if it's not I've come armed with a bunch of lavender, just in case.

# Sweet smell of success... #

So having checked out the locality, it's time to have a nosey at the property itself.

And here it is! It's a leasehold, purpose-built flat with four rooms.

It's on the first floor with a guide price of £85,000.

Built in 1954, the building certainly looks like it's bearing up well.

The roof appears sound, which is good news. It's double-glazed,

has its own front door and off-road parking,

plus it comes with a healthy 999-year lease.

It's always nice to have your own front door, but you've got a few hefty stairs to climb

to get up to the flat and it's quite an unusual shape.

Bedroom one through here, a little lounge through here. It's quite hexagonal, isn't it?

I say bedroom and lounge, but the auction catalogue describes the flat as having "four rooms"

as well as a kitchen, bathroom and WC. Maybe that's because the layout is pretty odd.

The end of this little corridor is the kitchen!

It's small, peeling wallpaper, there's a fridge sticking out.

And what's behind here?

Of course! It's the bathroom!

This flat needs some clever reconfiguration.

Hold on. Where's the toilet?

# No particular place to go... #

Here it is!

In the lean-to!

# All by myself

# Don't wanna be all by myself... #

No, this loo can't be left all on its own. It needs to be integrated with the bathroom

in one of the four rooms, then the kitchen can be opened up.

By making one of the other rooms into a lounge, you could have a much-improved two-bedroom flat.

And check this outside space out. I call it an added bonus.

This flat comes with its own garden, a feature that makes any property incredibly desirable.

It might need to be tidied, but this is a bonus worth having

and the outlook for the, er, outlook could also be looking up.

It may not look exciting now, but that old gasworks that backs onto this property

could be redeveloped. Outline planning has been granted by the council

and if it goes ahead, it can only mean good things for this part of Mitcham.

# It's all right

# Jumpin' Jack Flash is a gas, gas, yeah... #

Redevelopment nearby might initially mean disruption, but overall it generally enhances an area.

But that's in the future. What does a local estate agent make of what's currently on offer here?

First impressions: compact property, with four rooms.

Slightly odd layout. Needs reconfigured to be user-friendly.

But the flat was guided at £85,000, so could the work involved in updating it be worth it

on both the resale and rental markets?

Once the property is refurbished, we could market it at £160,000.

This property would rent on the open rental market at approximately £850-£900 per calendar month.

Those figures talk for themselves, don't they?

Once you've reconfigured the space, that little flat packs a powerful financial punch.

Let's see who fought for this one when it went under the hammer.

Lot 70. A four-room flat, it's got a garden,

it's convenient for Mitcham. 90,000?

90,000 down here. 91 anywhere?

91. 92, madam?

92. 93, sir? 94? 95?

96? 97? 98?

99? 100?

101? 102?

102. 103?

104? 105?

106? 107?

108? 109?

109. 110?

£109,000.

First time. Second time.

Third and last time. Can't quite sell it at that. You're close.

So it didn't initially sell, but one bidder, Anne, negotiated afterwards

and bought this four-room flat in Surrey for £108,000.

Anne works as a project manager in the education sector. It's a joint project with her husband, Tony,

who's an HR specialist. I met up with them both at the property

to find out why they made this purchase.

What I want to know is the story behind buying this flat.

Well, I think we wanted something different to do.

We started to look at auction properties. We went for one in London. I couldn't be at the auction

so Anne went on her own. And Anne did the bidding!

So you left this lady all to her own devices, to spend all that money!

Anne, what was it like for you on your own spending all that?

It's quite exciting, actually.

I sat and listened very carefully for how it all worked.

Then I tried to look professional by scribbling notes, but I wasn't writing anything!

I got to the limit and I had to stop.

And that was... I just thought, "Never mind." But then it was withdrawn.

They said to see the auctioneer. He said, "What did you want to pay?" So I said £108,000.

So he said, "Wait there." And he came back and said, "It's yours."

-Could you believe it? Were you so excited?

-I was in a bit of a panic mode at that moment.

"Oh, what have I done?"

-So, Tony, how did you feel?

-Yeah, pretty excited.

I actually got a text message that just said, "Got it."

# Now that you got it What you gonna do with it? #

So now that they have got it, what's the plan for this flat that needs more than a lick of paint?

How will you turn this into a good, saleable flat?

The bathroom's in a cupboard in the kitchen, as we describe it.

So one of the bedrooms will go into a bathroom. It'll be two bedrooms in the end.

But I don't think you can do anything else. The toilet's outside on the little landing

-down to the garden.

-Excuse me. I like to call it the lean-to.

-OK. We called it the upper terrace!

-You're so posh!

So when you move the toilet from the upper terrace, what will you do with that space?

That particular bit of space we'll transform to a utility area.

We'll put a washing machine in there with a tumble dryer on top.

-What's your budget for the work?

-Our budget is £10,000. We'll do 80% of the work ourselves.

The other 20%, moving the bathroom and plumbing and electrics, we have a builder

-who'll do some work for us.

-Are you dead set on selling it or would you rent it out?

I think we'd prefer not to rent. We've looked at the rental market and it's quite good.

But I think if we could, we would prefer to do it up and sell it?

Plan B might be to just flip it out. If somebody came with a good offer, then we'd consider it.

But really we'd like to do it up and make a nice home for somebody.

They hope to do the work to make that nice home in just 10 weeks, so they'll be busy.

-How much experience have you got with buying houses?

-None!

-This is...

I love the way you're laughing. You're so honest.

-Until 4 years ago, I'd never owned a house. My children owned houses before me.

-What do the kids think?

Well, we told Daniel and his wife Louisa first and they just were totally gobsmacked.

They couldn't believe. "Mother, what have you done?"

And my daughter is in Australia. She's another Lucy.

And, em...she was just, "I can't believe it. Why, Mother? What have you done?" You know.

And Tony's son is all keen to come and help. He lives local, so that's quite handy.

Guys, it's been fantastic meeting you today. This is one where I'm looking forward to the outcome.

-Thanks.

-Thank you.

Tony and Anne can only improve this quirky little flat

and once they do there's certainly a healthy return coming their way.

But will they do all the work for just ten grand?

Join me later in the programme and you can find out if they do.

Coming up. In Derby, there's more to this property than meets the eye.

As you can see, it's one of those properties that's a bit of a state.

Back in Mitcham, Surrey, Tony and Anne have taken to property developing like ducks to water.

Yeah. Good all round. Thoroughly enjoyed ourselves.

But first, in Cumbria, how has Daniel coped with working with Dad as his boss?

Stressful at times. We can get on each other's nerves!

In the Cumbrian town of Whitehaven, a three-bedroom semi-detached property went to auction.

Although it was a little tired and dated, and had a slightly odd side extension,

it wasn't in bad shape. So it seemed an ideal development project.

It was snapped up for £33,000 by local quantity surveyor Rob and his 18-year-old son Daniel.

-Tell me why you've bought it. Is this something to do with you?

-It's so I get my first project.

-My dad's done a couple of them before. It's me getting in with him.

-Great.

-A joint investment.

-A joint investment?

-Yeah.

-Fantastic. And what will your involvement be? Learning how to do up places?

-He knows a lot of trades. I just want to learn a couple as I go, really.

-Right.

Daniel's doing an apprenticeship in mechanical engineering so was not only hoping to learn new skills

but had invested some of his own money into the house. Armed with a £10,000-£15,000 budget

and a 6-9 month timescale, Daniel started his part-time apprenticeship in property development.

Now, one year later, we're back and...

What a difference.

The exterior's been re-rendered.

And the front area has been completely tidied up.

This is looking like a textbook refurbishment.

# I can tell you now There ain't a problem can't be solved

# And it's not hard to tell I've learned my lesson well... #

It certainly seems like Daniel's work experience has gone well.

In here we started by stripping everything back,

taking away the carpets and the plaster on the walls.

Then we pushed the fireplace back. There were bricks round the fireplace. We took all them away

and opened the floorspace. And we started by painting the walls and put laminate floor down.

Basically, just sprucing the place up.

So the front reception room is looking good, but what about the kitchen?

Wow! Rob and Daniel have completely transformed it.

It was quite an old and outdated kitchen,

so we've basically stripped everything back. So it's nice and modern.

It's plain white, black tiles. I think the result speaks volumes. It looks really nice.

Along with the kitchen being transformed, the downstairs toilet has had a makeover

to complete an impressive refurbishment downstairs,

while upstairs the family bathroom is now less Swedish sauna and more swish and stylish.

There are also signs that this house is now a home.

Just after we bought the property, people approached us and asked what we were going to do with it.

We said we were going to renovate it and they said could they have first refusal on renting it.

So we agreed a rent straight away. Obviously, they could see we were doing a full modernisation

so they basically moved in.

So the three bedrooms haven't just been refurbished. They're now fully furnished with the tenants

putting their own stamp on the work done by this father and son team.

How much of the end result was down to Daniel?

Basically, the painting was left down to me in the end. So I painted most of the walls, different coats,

plasterboarding and skirting boards. Just where I came in handy. I've been learning a lot.

Of course, for Rob and Daniel this isn't their full-time job.

They had to work in the evenings and at weekends to complete it. Daniel not only put the hours in,

he also invested £3,000 of his own money towards refurbishment.

But what was it like working together on a project where they both invested time and money?

I've enjoyed a little bit of time with my son. It's something to do together, father and son bonding.

-It's not often we spend that much time together.

-It's stressful at times.

-But all in all we got on well.

-Yeah.

It turned out their togetherness was slightly better than the house's structural togetherness.

As the front ground-floor window didn't have a sufficiently-strong lintel, it was reinforced.

The front exterior had to be rebuilt and they did substantial work on the garden.

Rob decided against removing the asbestos in the flying extension

and opted to have it enclosed with a plastic membrane.

Apart from being safe, this is a neat cosmetic solution.

But even with all their input, their £10,000-£15,000 budget was always tight.

We spent 17,400 in the end,

but I think what we spent extra,

doing the re-rendering, the fascias and the guttering

and making the envelope of the building maintenance-free for five to ten years has been worth it.

Rob might think a £17,400 spend on top of their £33,000 purchase price

might be worth it, but it takes their total investment to £50,400 without costs and fees.

Although they've already got a tenant, have they maximised the potential here?

What do two local estate agents think?

It's obviously been improved to an extremely high standard.

The attention to detail has surprised me and it's in excellent decorative order.

What I particularly like about this property

is the quality of the fixtures and fittings that they've used,

a nice, modern fitted kitchen, a white three-piece bathroom upstairs,

and a large garden at the back with...laid to lawn.

The owners have thought long and hard about the layout

and they've now created a light and open space for living accommodation which works very well in the kitchen

The house may already be working as a rental vehicle,

but have they invested their £50,400 wisely?

Now that the property has been refurbished to this sort of standard I would aim to achieve £70,000.

If I was putting this property on the market for sale,

I would put it on at £65,000.

So, a potential pre-tax profit of between £15,000 and £20,000.

What do Rob and Daniel make of that?

-I'm quite happy with that.

-Yeah.

-It represents a reasonable profit.

Obviously, in this climate, you know, I think that's fine.

They're certainly encouraging resale values, but have they achieved the best possible rental returns?

If I offered this property for rent in the current market, I'd expect to achieve £375 per calendar month.

Exposing this property to the rental market, I would expect to achieve £375 per calendar month.

We're actually getting a little bit more than that - £400 a month.

That's fantastic.

With a £400 per calendar month income, equating to an annual yield of above 9%,

this has been a very successful project.

Is it to be the first of many for this father-and-son team?

My wife's got a list of jobs to do a home, so I think we're going to have to have a little bit of a break.

But maybe, yeah.

I think in the future, but we need a little bit of a rest.

But it's worked out OK, so definitely do it again.

Derby is home to Britain's first ever factory,

so it could quite legitimately lay claim to being the birthplace of the Industrial Revolution.

But times have changed and the once booming railway and cotton trade

have been replaced by the shopping and commerce trade, keeping Derby buoyant and prosperous.

Well, parts of it anyway.

Just a hop, skip and a jump from Derby city centre,

and it's easy to understand why this street used to be highly desirable.

It's still very popular, but it has been slightly blighted

because of this rather unfinished development plot opposite.

Still, nice-sized properties and the one I'm here to see,

the guide price was 65,000 quid, three-bedroomed, three-storey... Let's take a look.

There's a lovely, old front door

and I like that the property is set back from the road, but it looks like it has become a bit of a tip

and living opposite a derelict building site, that's not ideal.

# It could be better than the way it is

# It could be better than the way it is

# It could be better... #

# Ba, ba-ba, ba-ba... #

Ah! It looks to be in a bit of a state on the inside as well, but let's look at the positives.

Nice bit of an entrance porch there.

The doors, well, might be salvageable,

but you come down this corridor and then through this door into the main living part of the house, I guess.

It's been sub-divided off at some point. You've got these doors leading into the lounge.

Quite a nice-looking fireplace.

The rear area here, big space where you could have a fireplace, so that's quite nice,

and the actual space itself is good.

But it is one of those properties that is in a bit of a state.

You've got to try and see through that to what it might become.

I quite like the layout. There's lots of space, a room there, and then through here into the kitchen.

Let's focus on the positives first.

The roof light is nice, shedding lots of natural light in here.

The space isn't bad, but it's a room that needs a bit of tender, loving care. Oh, boy!

It doesn't look like the cooker's been cleaned for a while either. Eugh! Toasted tea cake, anybody?

# You're gonna mess up a good thing, you're gonna mess up a good thing... #

The state of the house means it looks a long way from being the toast of the town.

But I think that underneath all this mess is a pretty decent property with some lovely period features.

So, upstairs and the general state of the place doesn't really get much better, but what have we got?

We've got a little bathroom and loo. I say "little", it's actually a fairly decent size.

Bedroom here, another bedroom there, then stairs to the top floor.

So let's talk about what you might be able to do with this place.

You could just restore it and keep it as it is as one house.

You could convert it into individual rooms and let them out on a room-by-room basis.

That is a good way to go and, financially, it might be quite interesting.

But there's lots of rules and regulations regarding houses of multiple occupation to adhere to -

fire escapes, fire doors,

and depending on the number of people and floors, licensing may be applicable.

But in terms of financial opportunity, it's certainly an interesting way to go,

and in a nutshell, what it says is this house has lots of potential.

# A good thing, yeah, baby... #

And potential is definitely a good thing, no more so than with the space on the top floor.

I'm slightly worried about whether the stairs meet modern building regulations, but apart from that,

it's pretty promising, as are the other two bedrooms,

and that huge bathroom.

There's even a decent-sized garden at the back.

What does the auctioneer who sold it

think of this two-bedroomed, terraced house?

The house is a little untidy, but if you're looking beyond the untidiness

it's a sound house, it isn't going to need a lot of mone

to retrieve the situation.

This was previously a rental, but is it best suited to being a single let, a room-by-room let,

or divided into flats?

With current rules and regulations,

if you divide it into flats,

you've got to throw so much money at it to meet the criteria that it really isn't economic,

so it's almost inevitable it will become a shared house.

Bearing in mind it had a £65,000-plus guide price,

what sort of resale and rental values could it achieve once tidied up and renovated?

When it's renovated, certainly 100,000, possibly a shade more,

but that will be geared to some extent by how much it earns if it's going to be rented.

I think if you were to rent this out as a single house,

it would have a rental value of probably around £500 a calendar month.

However, if you make it into a share house and let it out as rooms,

bearing in mind you've got much greater maintenance,

I think your income could probably b as much as £700, £750 a month.

Despite the number of hoops you'd have to jump through

to make this a house of multiple occupancy, the numbers appear to add up to taking that route.

This is one of those properties where an experienced developer would see through the current state

to what this place could become and if you want to become an investor, that's what you need to do.

It's in a mess, but it has great potential. Who saw the opportunity when it went under the hammer?

Lot number 13 is a three-bedroomed townhouse

that's got three-floor accommodation but needs upgrading and improvement.

Start me at 60,000 for it? 58?

Thank you, 58 I've got. At £58,000. 58,000.

59 somewhere? At £58,000, the opening bid.

59 on the left. At 59. At 60?

60,000. At 60. And 1.

61. 61 is bid.

62? 62, thank you.

63? 63.

63. 64.

One more? 65? 65.

66.

67. A half help you?

No. A half. 67 and a half.

Stick with it? 68?

68. 500?

500. 69...? Thank you.

69. 500?

Have another bid, it doesn't hurt. 69 and a half.

70,000.

70,000. And a half again?

70 and a half.

71.

71... Are you sure?

At £71,000 then once,

twice, third time...

Sold at 71,000, thank you.

'Although he didn't actually bid himself,

'for £71,000, the new owner of the three-bed terraced house in Derby is Taj.

'He bought it for his property partnership,

'along with business partner Kevin.

'He also runs a property rental agency and has his own portfolio of properties that he lets out.

'Kevin, who is a qualified plumber, looks after their maintenance and refurbishment.'

Taj, Kevin, lovely to meet you both. Why did you want to buy this place?

Basically, to complement my portfolio. I want to turn this into an HMO, house of multiple occupation

-What kind of HMO are you going to go for?

-Basically, just to convert it into two one-bed flats

and two studio flats.

So, four flats? How are you going to do that?

This will be one. One room here.

Kitchen, bathroom.

Upstairs, two professional studios with a shared bathroom

and the top floor made into a single one-bed, self-contained unit again.

Wow!

-You're certainly squeezing everything you can out of this property in theory.

-Yeah.

# Bend me, shape me any way you want me

# You got the power to turn on the light... #

'That certainly does maximise the space.

'It's what they've done on other similar properties nearby, so they know it's possible,

'but they haven't ruled out room-by-room letting either.'

At what point will you decide what to do? That will decide your route in terms of renovation.

Once we've cleared the property and we take it back to the bare shell.

There's some improvements that need to be made to bring it up to the HMO licensing.

Once we deal with these issues, we'll then decide how we move forward.

So what will your involvement on a day-to-day basis be?

My involvement on a day-to-day basis is mainly project-managing it.

Swanning around and telling other people what to do?

Well, I mean, at the end of the day, Kevin does a great job.

He knows effectively what we want to achieve,

but I'm really here just to provide guidance when he's got some questions he wants to bounce off me,

-and checking to see if we're on schedule.

-Do you do some building works too?

I'm a qualified plumber and a time-served joiner,

so, basically, I like to get involved.

I think he's a bit modest there. He can do everything.

So what is the timescale?

KEVIN SIGHS

Lots of in-taking of breath there!

You know, we've talked about times.

-I think we can turn this round within four months.

-Yes.

-Yeah.

-And the total budget?

-Within 20K.

-Within 20K.

'£20,000 to create four flats seems pretty cheap,

'but having worked on and maintained so many properties over the years,

'not only do they know how to maximise the space, but also how to maximise their budget.'

-Then once this one's done, on to the next project perhaps?

-Correct, yeah.

-Where does it end?

-I'm very passionate about property. I have been for a number of years now.

I've been a landlord over 20 years, so, you know, it's what gets me out of bed every morning.

-And do you still enjoy doing these things?

-Yes.

-It's my passion.

-Right.

This is my enjoyment, properties like this.

What is it that gives you that excitement?

-I know what the finished article will come in at.

-Which will be?

We'll wait and see.

-Congratulations. Good luck.

-Thank you.

-We look forward to seeing how you transform this place.

-Thank you.

-Thank you.

Well, Taj and Kevin have certainly got a lot of work ahead of them,

but they don't seem too fazed by what's in store.

The big question, of course, is will it be flats or will it be individual rooms for rent?

Find out what they decide later in the show.

Getting your property at the right price is the first step to success.

But the next step is equally important.

Sticking to timescales and budgets is the only way to maximise your profits.

So how are our purchasers progressing? Let's find out.

In Mitcham, Surrey, a four-room, first floor flat went up for auction.

This quirky property had a somewhat strange layout

with rooms off a central corridor,

then a small kitchen with a bathroom off it.

And if that wasn't odd enough, then the loo was all alone in a rickety old lean-to.

But none of this put off first-time property developers Anne and Tony.

They had bought the flat for 108,000

and armed with a ten-grand budget, hoped to turn it around in just ten weeks.

-So how much experience have you two got with buying houses?

-None.

I love the way you're laughing. "None at all." You're so honest.

-Yeah, well, until four years ago, I had never owned a house.

-Really?

My children both owned houses before me.

Now, just six weeks later,

we returned to see if these late starters had blossomed into successful property developers.

# What a good year for the roses

# Many blooms still linger there

# The lawn could stand another mowin'

# Funny, I don't even care

# As you turn to walk away

# As the door behind you closes

# The only thing I have to say

# It's been a good year for the roses... #

So, apart from unearthing floral patterns on the wallpaper,

the flat hasn't changed fundamentally. What happened?

We put the flat on to the market straight away just to see if anybody wanted to buy it as it was.

And, um...we were quite amazed.

We had dozens of people come through the door to view it.

Some walked in and walked straight out again,

then somebody bought it, so we were very pleased. Somebody else wants to do it up!

# That's why I'm leaving it up to yo

# You decide

# What you're gonna do... #

I really wanted to do it up and make it look nice,

but at the same time it is a business venture,

so I'm afraid the head had to rule the heart on this occasion.

The offer they've accepted on the flat is for 128,000

and as if that wasn't good enough, they've found yet another way to generate income from their purchase.

Apart from stripping the walls in here,

the room was actually full of books and metal shelving.

And a friend of ours has a garage, so he was very keen on the metal shelving.

A huge amount of books went to the charity shop, but some we sold online as well,

which made a small profit of £50, which was great.

Well, £50 is definitely worth having and as a financial exercise,

it all seems positive.

There really hasn't been a budget.

Apart from all the seller's expenses and buyer's expenses, maybe £100 or less.

And then we got some money back on the books anyway.

Everything else, where it could be, was recycled,

so, yeah, good all round, thoroughly enjoyed ourselves.

So, really no budget to speak of,

but Anne does reckon that all their costs and fees came to around £6,200,

taking their total outlay here to £114,200.

As they sold it for 128,000,

that's a £13,800 pre-tax profit.

So have they maximised their purchase by selling it straight on

without refurbishing it? What do two local estate agents think?

It hasn't changed much since I last saw it.

I do believe the vendor has taken some wallpaper off the walls,

but apart from that, it's the same.

I look beyond what we see now.

I see potential for improvement,

I see a lovely home for a young family

and whoever gets this property can do a lot with it.

So did the couple make the right decision, flipping their £114,200 investment?

When fully refurbished, you'd be looking to sell this for around £175,000.

Once the property is refurbished, the property could be put on the market at £155,000.

I think the 155 is the more realistic amount.

And that was really the figure we were working to, had we completed the work.

So, if they had spent the proposed £10,000 on the flat

and then sold it for 155,000,

they could potentially have made a pre-tax profit of 30 grand,

but did they get a realistic resale price on their stripped-down purchase?

In its current condition, you'd look to sell the property for around £140,000.

In the locality, there's another property exactly the same on the market at 135.

Well, we thought 130

and were quite happy to take 128.

That £128,000 price did give them a £13,800 pre-tax profit,

although they could have more than doubled that if they had done the work.

As their first development project, I can understand

why they took the money and ran, but has it whetted their appetite for more?

Once this has finally sold and all the money has come through,

we'll go back to auction and have another go and see how we get on.

Close to Derby city centre, a large, three-bedroomed, terraced property went to auction.

On first sight, it was a real mess,

but a look beyond the chaos revealed a place with plenty of potential.

Or so developer and owner of a property rental agency Taj thought

when he bought it for £71,000.

He was hoping, with the help of his business partner Kevin, to unearth that potential.

I want to turn this into an HMO, a house of multiple occupation.

-What kind of HMO are you going to go for?

-Basically, just to convert it into two one-bed flats

and two studio flats.

-So, four flats?

-Ideally, yes.

On a budget of £20,000 and a four-month timescale,

the plan was for Kevin to project-manage the conversion to the four flats.

Now, over 11 months later, we're back.

It certainly looks very different from the front.

There are new windows and doors and clearing the hedge certainly improves its kerb appeal.

But what will we find inside?

Has Taj created four flats?

As we've got it structured at the moment, we've got a top flat on the second floor.

This one-bed top floor flat is complete and comes not only with a fully fitted kitchen...

..and en-suite bedroom, but it's also got a tenant.

There's two rooms on the first floor

So, a slight change of plan with the first floor bedrooms converted into two bedsits.

The larger of the bedsits is en-suite.

The smaller second bedsit has access to a shared kitchen

and a shower room created from the old, over-large bathroom.

But what has he done on the ground floor?

The plan here was to create living space out of the original space we had,

so we had a living room and a front lounge.

What we've decided to do from the two rooms

is basically utilise the space from the front lounge,

make an en-suite,

and that then becomes the bedroom.

This existing space, we decided to put a partition

and make a corridor for the utility room on the other side,

so this is one self-contained area.

That's what we've achieved here, then it leads into the kitchen.

What will eventually be a fully fitted kitchen leads out

from this one-bedroom, self-contained flat into its own garden.

So Taj is certainly well on the way

to maximising the property's potential, but it's still not complete.

It's nearly a whole year into what he hoped would be a four-month project, so what's been happening?

Unfortunately, I've had my own hiccups since we started the project.

I've also been working on a communit church for my own community which kicked off in February,

which also coincided with my, um...partner Kevin

also deciding not to carry on with the project.

So that hasn't helped me

and I think it's delayed the project by about three months.

# You know, I dig you doing your thing

# And I'll turn you on when I do mine... #

So Taj ended up being much more hands-on with this very complex project than originally planned.

However, he has finally managed to turn this into a house of multiple occupancy

by creating that one-bedroom attic flat, two bedsits on the first floor and that one-bedroom garden flat,

but the setbacks have had repercussions for his ambitious £20,000 budget.

Because of the time and using more contractors and the delay,

I think we're spending close to about 35 and a half.

A £35,500 spend on top of Taj's £71,000 purchase price

takes his total outlay to £106,500 without costs or fees.

But has he found the key to maximising the property's potential?

What do two local estate agents think?

It's certainly different to what it was.

There's been an awful lot of renovation work gone on

which can only be to its credit.

It's probably had as much as necessary to make it feasible to be let or sold.

I'm quite impressed, strangely.

The property is a bit higgledy-piggledy,

but obviously he's done it with the pound signs in his eyes.

A lot of houses are done for the love of it,

but this one is a business, rather than a property for himself.

Well, it might be a bit higgledy-piggledy, but can it work out as a rental vehicle?

First of all, what about those one-bedroom flats? That's the one on the top floor and the garden flat.

With bills included, you could be looking at achieving a rent of around £500 per unit.

If we start with the garden flat, I would say maybe 450 a month.

On the top floor, I would say maybe 400 a month.

Those figures are pretty encouraging, but how about those two smaller bedsits?

How would they do on the all-important rental market?

Each room per month could be rented for just under approximately £300.

The ones with the en-suite, £300 per calendar month,

then for the last room which is the shared bathroom which is fairly decent,

I would say £280 per calendar month.

That means if all the rooms were occupied,

Taj could get a rental return of £1,430 to £1,600 per calendar month.

That's a whopping yield of between 16% and 18%,

but as the owner of a rental agency himself, what does he make of the estate agents' valuations?

I'm getting 495 for the top flat.

I'd be looking to get that at least for the ground floor flat

and the two rooms, 375 for the en-suite room

and between 325 and 350 for the other room.

Taj hopes for more rent than the estate agents estimate,

but the returns are impressive either way,

reflected by the potential resale value of the property that he's invested £106,500 in.

As a going concern with all rooms filled,

you could be looking to achieve around £200,000.

I think realistically it's going to be around £160,000.

So, a potential pre-tax profit of between £54,000 and £94,000

and a rental yield above 16%.

That does sound like a pretty successful development project to me,

but how does Taj reflect on this property purchase?

I'm feeling relieved, I'm feeling really good that we're coming to the end of it.

The end result is obviously rewarding.

Has that whetted your appetite to make a go of property development?

-If so, there will be more compelling stories for you next time.

-On Homes Under The Hammer.

-Goodbye.

-Goodbye.

Subtitles by Red Bee Media Ltd