Episode 53 Homes Under the Hammer

Welcome to the show. Over the years, Lucy and I have witnessed

the ups and downs of the property market.

Whether it's a home or an investment you're looking for,

you want to see its value go up, not down.

Therefore, it's really important to buy at the right price.

One way you could do that is by buying under the hammer.

Well, we've all heard about the ever-changing property market.

But by doing a deal at auction, well, it's one of simplest processes.

Your hand goes up, the hammer goes down, you've bought it.

So what did people buy today?

I visit a three-bed terrace in Shildon, County Durham

and discover that some houses are priced so low

you might not be able to buy them.

In Burslem, Stoke-on-Trent, we meet a father whose investment in property is very much an investment

in his children's future.

And in London, these two mid-terrace flats in Streatham

may need work, but for a potential profit of over £130,000,

it's worth it!

These properties were all purchased at auction.

We find out who bought them and for how much

when they went under the hammer.

I'm in County Durham, north of Darlington,

south of Durham itself,

and a little town called Shildon,

once known as the cradle of the railways

because of the part local industry played in developing the country's rail network.

Big question is, will the property I'm here to see today be on the right tracks?

# All aboard! #

The Shildon Works closed in 1984,

after almost two centuries in business.

The area is less prosperous than it used to be,

but still a popular place to live,

as property prices are more attractive than its near neighbours.

And by attractive, I also mean more affordable.

# I'm going off the rails on a crazy train... #

So, what brings me here?

Well, it's a property on this fairly busy main road,

which isn't ideal,

but wait till you hear the guide price - £29,950-plus.

Plus about 50 grand, it'd still be worth a look.

So, that kind of money, if it's anything better than a garden shed...

Well, not quite, I'm being a bit facetious there.

But basically, I'm not expecting much,

and yet you walk in here...

Doesn't smell of damp.

It looks like it's been relatively recently decorated.

I mean, everything is a bonus.

It's a...yeah, it's a good house.

Bit noisy in that room, because you've obviously got the fairly busy main road there.

But nice-sized rooms. Front room there, a rear sitting room here.

I guess that's where the house would have ended at one point,

but in this case, it looks like there's an extension.

So this is where your kitchen is.

I mean, it's a half-decent size.

You are limited to the kind of design you can go for -

this sort of galley look or U-shape.

At the moment, it's got this pine effect.

The interesting thing with this is, it looks really dated.

If you put a really nice matt paint on here,

white, you'd transform it.

In terms of renovations, depending on how much you have to spend,

one thing you could save on is just by painting that.

Definitely replace the units.

Boiler's definitely seen better days.

But all in all...you know...

you've got a lot of space.

As I make my way upstairs, I realise

it's not just the kitchen that might need some redoing.

STAIRS CREAK

Can you hear that?

Wow! Those stairs...

feel...ahem...

decidedly dodgy. That needs investigating.

But once you get upstairs, if you actually make it...

Half-decent-sized bathroom and loo,

although it could do with a bit of - what's the word? - regeneration.

Little landing area.

Large bedroom at the back there.

And then two more bedrooms. Definitely not short of space.

And I just keep coming back to that price - wow! Wow, wow, wow!

# Wow, wow, wow, wow... #

That guide price is unbelievable.

# Unbelievable... #

Even if it does need some modernisation, it's nothing desperately urgent on the inside,

although maybe the outside needs a bit of work.

There could be lovely stonework under there.

I'll say it again - wow!

# Unbelievable... #

This is a really truly outstanding investment.

Let's say you get this for approximately the guide price of £30,000-odd

and you get, what, £400 a month rent for it -

that's £4,800 in a year.

That's 16% yield. 16%.

Apart from the fact that's an amazing return on your money,

just think about it - take the money out the bank, put it into this place,

and in just about five years' time, you've got all your money back

and you're left with this house.

We asked a local estate agent whether she agreed with me.

This property, it's a little tired.

But not a million miles away from a lettable condition.

Little bit extra work would be required

if you were to put it up to sell to get the best price in what's quite a difficult market locally.

To bring this property up to a reasonable standard,

there's quite a bit of decorative work to be done,

because there's quite a bit of Artex, which people don't like.

And the bathroom's very tired and the kitchen also

and it does need new floor coverings throughout.

What are this property's resale prospects?

Once the property's brought up to a reasonable standard,

I would expect it to be worth in the region of £60,000 to £65,000.

And as a rental?

Being three-bedroom, this would be quite a popular property, I believe,

and would probably command somewhere in the region of £425 per calendar month.

Well, what can I say? It's a great little house,

nice location,

and at that kind of price, you just can't go wrong.

Let's see who agreed when it went under the hammer.

It's a spacious three-bedroom mid-terrace property.

Let's not waste time. £30,000 anywhere?

No bid at 30?

At £30,000.

I have one bid of £30,000.

31 anywhere?

I have one bid of £30,000.

31 anywhere else?

31 bid.

Standing at 31. 32.

32 bid. 33?

I'm at 32,000. 33.

A bid has been called in over the phone and is currently leading the auction.

I'm selling once at 32...

For the second time at £32,000.

Sold. Gentleman's bid at £32,000. Seems a good buy for someone there.

I agree! At 32 grand, that is a good buy.

That phone bid was made by business partners Perry, seen here on the right,

who's from London, and local boy Aidan.

Formerly developers in their own right, they've now joined forces

and are focusing on this area of Durham.

-Aidan, Perry, good to see you both.

-Hi.

Congratulations. How does the partnership work?

What do you both get involved in?

Perry and I are beginning a portfolio/investment strategy

that we're working on together.

So that's a new direction, if you like, for us.

And why are you joining forces with Perry?

Well, I think... I like the man, he's a very nice guy!

So that's a good place to start.

He's a very honest chap

and shares a similar belief

in terms of the quality we should be renovating to.

The pair have developed a strategy which is not just focused

on improving one house to the standard they set.

The long-term aim is to maximise their equity in each property

by looking at the wider picture and whole streets,

not just individual homes.

If you own six properties on a street of 12 and they're all renovated,

regenerated, to a really nice standard,

that becomes ultimately a more desirable street

which benefits everyone and the investors.

Aidan and Perry were attracted as investors to this area of the country

because of the purchase prices and the returns on them.

They know they couldn't hope to buy properties in the southeast

for these sums.

And how do you see the local scene?

I think it's probably the same as everywhere else in the country -

it's very challenging for, certainly, people looking to buy for the first time.

If you were to approach a bank

for a rental mortgage, if you like,

they have a minimum criteria for a property, which is obviously

normally around £50,000 or £60,000

and obviously, these properties are slipping underneath that value.

Who'd have thought a house could be too cheap?

It can be a mad world in the property game.

Of course, it varies across the country and from lender to lender.

But sometimes a house with a whole host of problems

and a really low price

might scare off lenders.

And, interestingly for mortgages,

there is an absolute minimum of 25 grand that can be borrowed.

That is something to bear in mind when you're looking at lower-priced properties.

So, what impact do local investors have on the housing market?

In any way are you adversely affecting the opportunities

for local people to buy these properties?

From a moral perspective, if you like,

what we're doing is we're providing... This is an empty house

and we're turning it into a good-quality family home for somebody to rent.

And at the moment, it isn't that,

so my perspective would be, generally speaking,

what we're doing is a positive for the towns that we're working in.

Most of these are lying empty.

A lot of the ones we've bought are two years plus as voids,

so it doesn't make any sense to leave them.

Perry and Aidan believe they can raise these houses

up to a decent standard and increase their value.

So how will they do that with this particular property?

Certainly, we're going to redo electrics, top to bottom.

It's going to need a new central heating system.

It's running on the very narrow pipes

and I don't suppose there's been any calculations done for heat source or anything similar,

so we need to go back through all of that.

I think after that, you're looking at new kitchen and bathroom.

New kitchen and bathroom, definitely. Maybe re-skim some of the walls, definitely the ceilings.

And we're probably going to knock out the fireplace in the front room.

-All the way up?

-Yeah.

-OK.

-Create a bit more space.

-Yeah.

Aidan and Perry plan to spend £20,000,

which is a substantial sum, bearing in mind the purchase price of £32,000.

You're not necessarily buying something in pristine condition,

so there's some work to do. Typically, we could be...

-at 100% or more in terms of the renovation cost over the price of the property.

-Wow!

Yeah.

We've also got an unforeseen - the stairs going up.

When you walk up them, you'll hear they creak like nobody's business.

So I think that's going to need major work to it.

-Good. Well, congratulations.

-Thank you.

-Good luck with it.

Look forward to seeing how you get on.

Well, what an interesting scenario you've got going on here.

Houses that are currently priced so low

that you can't raise finance on them, get a mortgage.

Wow! But Perry and Aidan recognising the potential of this place -

paying £32,000, spending £20,000.

That's 62% on top of what they paid when they bought it.

Wow! But putting the money in to get that amazing return.

How will they get on? You can find out later in the show.

# I passed this way before... #

I'm back in the Potteries, on the terraced streets of Burslem,

one of the six towns that make up the city of Stoke-on-Trent.

There's something about a well-proportioned red-brick exterior that makes my heart sing.

Well, I'm in a traditional street of terraced houses,

like many similar streets in the UK,

and ones that I've been to a hundred times before over the years.

But there's a reason why these kind of houses are popular -

they're solid, they're well-built, they're good value for money.

And that's certainly the case with this one.

The guide price was £45,000-plus.

Two bedrooms, nice brick-built exterior.

Let's see if I can fall in love with the inside as well.

Now, call me Martin the psychic,

but I can already sense

a traditional two-up, two-down layout

with good rental potential and possible appeal to first-time buyers.

Let's see if I'm right.

Wow! Here's the front living room.

It's not too bad. I like the high ceilings.

Lots of light coming in from that little window area.

Through to the rear of the property, where we've got a rear living room.

Um, yes, I mean...

I've seen worse.

I've seen better. So it's kind of in the middle.

Let's see if upstairs excites me further.

# Seems like old times... #

Beneath the teasingly bland facade,

there might be one or two hidden problems here,

but perhaps it's too early to be mentioning the D-word.

Let's just say the downstairs of this formerly vacant abode

might be a little...moist.

So, up here - and two bedrooms.

Well, there you go. Sometimes I scare even myself when my predictions come true.

What you've got there is a really traditional solid little house.

Now, that has lots of pluses going for it.

If you're looking at buying this to live in,

you've got a good idea of what it'll cost to sort it out.

Similarly, if you're doing up to sell on, or just to rent out.

There's not too many unknowns.

Good, solid little house, and I like it.

But true to the period, there's no upstairs bathroom here.

Well, as is the case with many of these two-up, two-down terraces,

they've been extended, usually - as this one has -

with a single-storey extension coming out of the back.

That creates a really useful bit of extra space

and, as is often the case, it houses the kitchen.

It needs replacing, this one.

I don't think it does the property justice.

And then heading through the kitchen right to the back of the property,

where you've got your bathroom and a separate loo on the end.

It all looks a little bit...

like it could be better.

So, spend some money in here and in the kitchen. Money well spent.

Bathroom downstairs - usual story.

Around here in these kind of properties, I don't think it really matters.

So leave it as it is, but tart it up.

However, to be thoroughly thorough,

it's always best to find alternative ways of viewing a property.

Here's a bit of a tip. Whenever you're looking round a house

and maybe it's got an extension, like this one has,

use the windows to look out and check what state the roof of that extension is,

because that can often be an indication

of the state of the roof of the rest of the house.

In this case, it's not looking too good.

We've got ridge tiles, which have got concrete,

which looks like it's breaking away. That'll start leaking if it hasn't already. We've got slipped tiles.

We've got bits of flashing that have come adrift.

That roof itself definitely is going to require some work,

as will the gutters. But my fear would be,

if that's not been looked after, then neither has the main roof.

So, look out of the windows. Just use everything you can

to assess the state of the property.

We asked a local property expert to cast his eyes over this house.

First impressions of this property,

it's very typical for this area.

It's turn of the century, old terraced-style property.

The condition isn't actually too bad at the moment.

There's just really some improvements that are needed.

The downside at the moment is that most first-time buyers

would probably want to do improvements before moving into the property.

The kitchen and bathroom, they are very basic,

but they are usable.

However, I do feel they are likely to be replaced in the near future.

There does appear to be works that are probably required to the roof

and possibly a damp-proof course would need to be installed in the property.

Possibly not too much to spend here.

So what could it sell for once done up?

After renovations, I would market this property

in the region of £75,000.

What could the rental income be?

In good condition, I would anticipate a rental income

in the region of £425 to £450 per calendar month.

So, all in all, a pretty decent property,

especially around that £45,000-plus guide price.

Yes, you'll have to spend some money on the roof

and sorting it out a bit inside.

Let's find out who wasn't put off by that when it went under the hammer.

Lot 75 is in Burslem.

Because it was one of the last auction lots,

bidders were already thinning out.

40 to start me on this one?

Save time. 40, can I say?

38, then. 38 bid.

£38,000. 40, can I say now?

At £38,000. 40 now?

40. At 40.

I'll go in 1s if it helps. 41 anywhere?

41.

42.

No? At 42 in the middle.

At £42,000. 43.

43, seated.

44? 44.

45. 46.

47.

At £47,000, seated.

At 47. Against you, standing.

Half, he's saying. 47,500. 48.

And a half?

No. At £48,000, then. The bid is seated.

No mistake. Against you, standing.

Selling, then, at 48, for the first time.

At 48 for the second time.

Third and final time at £48,000.

You bought it, sir. Well done.

David and Corinne certainly seem very happy with the outcome.

The sale price of £48,000 was lower than David was prepared to pay.

I met him at the property to find out why he wanted to buy it.

-David, great to meet you.

-Hi, Martin.

-Congratulations.

Tell me why you wanted to buy this place.

Just looking to build a couple of properties up to get a little portfolio together for my children.

For your kids? Oh, great.

What's behind that?

I've got two boys. They've got moderate learning difficulties.

So just trying to get a bit of a nest-egg together,

to support them when they're a little bit older.

Fantastic. With a view to them living here?

Potentially, or they can sell them and move to something else.

I'd like to get about four or five properties

and then at the end of it, they can decide what they want to do with them -

sell them and buy something better or if they fancy living in one of them, whatever they want to do.

-How old are they at the moment?

-The youngest one is nine in a few weeks' time

and the eldest is 12.

They have got a chromosome disorder,

which is a genetic disorder.

It means they go to a specialist school for children with learning difficulties.

But they're mobile and out and about and will cause you lots of havoc!

Fantastic!

So you're not doing this for you, then?

Indirectly. And also,

it's money that I would be putting towards a pension,

but I'd rather put it into property.

So why this particular house?

It's local - it's probably about three-quarters of a mile from where I live.

So I can manage it myself.

And it just seems to be about the right amount of work

that I can afford to do on it.

Have you done this kind of thing before?

Not for rental, but I've done two of my own properties up where I live,

and had trades in and gutted them completely from head to toe.

And we've basically just refurbished them to our own standards.

As these kind of properties go, it really isn't in bad condition, is it?

I think it's a bit deceiving, to be honest,

because it does need quite a bit of work doing.

-What have you found?

-The roof and damp-proof course.

And we also need to do the work in the kitchen and the bathroom.

-Right.

-So, a bit more than what I would have planned to do,

but nothing too major.

So do you get hands dirty?

Unfortunately not. I spend most of my time trying to keep my two boys occupied at the weekend.

And we go out and do interesting things and try and have a good life.

But I've got people that'll come and do this for us.

So the return isn't as much as it would be if I got my hands dirty,

but that's a trade-off.

So, tell me exactly what you're going to do to sort it out.

First thing is that we need a new roof

on the main building and also on the extension outside.

Damp-proof course all the way through.

New central heating boiler. I think the radiators

and the pipework are OK, and a new kitchen,

and we're going to make some changes and alterations into the bathroom.

-Which are?

-I'm planning on extending the kitchen

and making the bathroom a little bit smaller,

because it's quite a large bathroom with a separate toilet,

and we're going to knock that into one

and make the kitchen a little bit bigger and more usable.

David has a budget of £18,000 for renewals and repairs.

I want to do it right, because I'm intending on keeping it.

It's not a flash and get rid of it job.

What kind of rental return do you think you might get?

Properties around this area I believe are fetching somewhere between

£400 and £450 per full calendar month.

Right, OK. So a half-decent return then, really.

-Not too bad.

-What's the timescale?

I'm trying to get it done within three months.

So most of the trades that are coming to give me a hand to get it done

will probably be coming at the weekends

and I'll also be coming and doing some work at the weekends.

So it's not their primary work during the week.

So we'll just fit in with them as and when we can.

-Well, congratulations.

-Thank you.

-Have your sons seen it yet?

-Yes, they've been up.

They tried to scam me this morning to say that they were off school

and they could come and do some filming with me if it was available!

But yeah, they want to come here this afternoon after school

-and start ripping the kitchen out.

-Oh, they do?

They're going to get heavily involved, then?

They'll be here and doing whatever bits they can.

-Listen, congratulations. Good luck with it.

-Thank you very much.

-Look forward to seeing how you get on.

-Thank you.

So David's getting himself a good little property in Burslem

and setting up his children for their financial future.

Fantastic. How will he get on?

You can find out later in the show.

Coming up... Two flats in a mid-terrace property in Streatham

don't make my heart sing.

It's got a very negative feeling for me, because it really does feel hemmed in.

In Burslem, David finds that when it comes to renovations,

boys will be boys.

They quite enjoyed smashing the old kitchen to bits

and ripping out the old bathroom.

But first, we return to Shildon, County Durham,

to see how Aidan and Perry's modernisation is going.

It has been to the wire, no doubt about that.

We're back in County Durham,

where this three-bedroom mid-terrace property in Shildon

was bought for £32,000,

and I thought it was a lot of house for not a lot of money.

It was bought by Perry, here on the right,

and his business partner Aidan.

This pair aren't newcomers to the development game

and have an interesting strategy for developing in this area.

If you own six properties on a street of 12 and they're all renovated,

regenerated, to a really nice standard,

that becomes ultimately a more desirable street, which benefits everyone and the investors.

Business partner Perry felt that although they were going to make a good yield

that there were benefits to the local community as well.

I think we're doing something positive in the area,

because most of these are lying empty.

A lot of the ones we've bought are two years plus as voids,

so it doesn't make any sense to leave them.

With a tight five- to six-week schedule

and a budget of £20,000,

62% of the actual house price,

is this property up to scratch?

Well, two and a half months later, we're back.

# Everything changes but you

# We're a thousand miles apart And I miss you, baby

# Everything changes but you

# You know every single day I'll be thinking about you

# Everything changes but you

# I'll be thinking about you

# Thinking about you... #

It certainly looks like Perry and Aidan have made a difference here.

If some of the rooms seem slightly more spacious,

there's a very good reason for that, as Aidan explains.

The room's been changed fairly significantly

by the removal primarily of the chimney breast.

This was a decision we made early on to increase the space in the room

and provide probably a slightly better entrance to the kitchen.

We've also removed the cupboard in the bottom corner,

which is now just the area under the stairs, rather than intruding

into the room as a whole.

And I think, ultimately, both of those have been the right decision.

The extra space is a big improvement.

What I hope has been changed are those creaking stairs.

-CREAKING

-Can you hear that?

That creaking staircase no longer sounds like

something out of a horror film.

When we first got possession of the house,

we found that the staircase was really, really creaky.

So we decided, when we had a look at it,

that it wasn't worth patching it up.

There was all bits of chipboard

and other bits of wood glued together.

We ripped the whole thing out and, as you can see, we've renewed it all.

And it's fantastic now.

Fantastic indeed. The pair had originally estimated

five to six weeks for the renovation,

so how long did they take?

In actual fact, we were able to drop a few extra bodies onto it

and complete it inside of four weeks,

which is the quickest turnaround we've had to date,

given the time pressure of having a tenant ready to go as well.

So four weeks is good. Really, really happy with the finish and everything.

But it has been to the wire, no doubt about that.

So the schedule worked out, but what about the budget?

We spent about 25-ish.

There was a couple of unforeseens, like the staircase.

So I'm not too unhappy about that.

I think it's a good show home for what we're capable of doing.

What do two local estate agents think?

We begin with the one who viewed the property first time round.

The transformation of the property is marked,

because it was previously very old-fashioned,

with textured ceilings,

old-fashioned fireplace, very sad kitchen.

The jobs have all been done right through.

And also the addition of a brand-new central heating system, so they've worked really hard.

The property's very modern. It's in a very clean and tidy condition.

The kitchen looks well.

The bathroom is modern and a white suite.

All in all, the property has a very nice look about it.

There are lots of private rented properties available in this town,

so you do need, when you're doing a job as a landlord,

to have a nicely finished property

to attract a tenant, and I believe this has been done to the appropriate standard.

They sound impressed.

Aidan and Perry spent a whopping 62% of the purchase price

refurbishing this property,

bringing their total outlay to £52,000.

So, has the money been well spent?

The estate agents both agreed the house would market

for £69,950.

That's very good, but could be a bit higher, I think.

I think in the current market, it's probably pretty fair.

Yeah.

Should this property sell for anywhere near the estate agents' valuations,

Perry and Aidan could make a profit of £16,950 before tax and expenses.

But what about the rental valuations?

For letting purposes, I'd recommend they ask £450 per calendar month.

The rent that I think they should be asking for the property

would be in the region of £425 per calendar month.

That rental estimate would give a yield of just over 10%.

Well, having rented it out already,

we've achieved substantially higher than that.

So I think they're way out.

What with that quick turnaround

and beating the estate agents' rental expectations,

these boys seem to have found a winning formula in this volatile property market.

So, what's next for them?

We're looking to do some more work on larger-scale properties.

We're converting them into one-bedroom flats again.

We're also working together on helping other investors...

achieve similar kinds of returns

in areas that we now have quite a reasonable knowledge of,

in particular, in the County Durham area.

Yeah, so we've plenty more on the cards this year.

Today I'm in Streatham, southwest London.

It's a popular suburb,

as it only takes 20 minutes by train from central London,

yet right beside parkland.

There are plenty of shops and restaurants

and just a few minutes' walk from the High Street

in this tree-lined street of Victorian terraced houses

is the auction lot.

Now, today I'm here to see a mid-terrace building.

It had a guide price of £425,000.

It was once occupied as a single dwelling,

but it's now been converted into two flats

and it also has the bonus of a loft conversion.

This sounds like an exciting opportunity. I can't wait to explore further!

I'm going to have a look around.

Well, the outside's retained some lovely features - a promising start.

So, in through the main door to both flats.

Lovely to see the original front door and the beautiful tiles outside.

Not many character features to speak of inside.

Let's start off with the ground-floor flat.

We've got a bedroom through there,

a bathroom.

You can see it's already been sensibly carved up.

Second bedroom here. All partitioning's been done.

Under-stair storage here.

And you've got an almighty kitchen!

Wow! This really is a big space!

A bit of an area of devastation over here.

My guess is lots of water has been leaking down,

creating this condensation,

turning it into lots of damp.

You can see over here somebody's been drilling down,

possibly to check the footings.

I'm not even sure whether an extension like this would comply

with building regulations.

I would really want to get that checked out.

And for me, this might be a little too big inside,

because when you look outside...

You've heard of the phrase "postage stamp"?

That's your garden!

We didn't have access to the outside,

but believe me, it's small. And I reckon there are enough issues inside to concentrate on here.

But the damp and construction problems will need expert advice.

I'd think about getting a structural engineer along

to cast his eyes over this living area.

Fortunately, it gets better as you head back to the front.

The bedroom and bathroom appear to need just a good makeover.

The large front bedroom has plenty of potential.

Time to head upstairs to the split-level three-bedroom flat.

So this is the first-floor flat with two bedrooms on this level.

Now, look at this - a partition has been created,

obviously for separate access for the room upstairs.

But it's got a very negative feeling for me,

because it really does feel hemmed in.

There's not much space at all. Quite cramped.

You've got a lot of rooms going on back there.

And this is a lovely sunny room. I love it.

You've got a beautiful fireplace here with some original tiles.

And then...ta-da!

Yes, you've got a kitchen in a cupboard.

Not working for me at all. In fact, I'd love to reinstate this room,

get this out of here and put it in another room entirely.

I think I'd like to spend a bit of time rejigging this space.

And I certainly want to investigate what's going on upstairs.

Before I do that, I'm keen to check out the two bedrooms.

This one is directly opposite the entrance door to the flat.

But this corridor that's been constructed

really makes the flat feel very narrow.

If I turned left when I came in,

I'd have gone past the bathroom

and reached the second bedroom at the back of the flat,

overlooking that tiny garden.

Time to head upstairs to what is supposed to be the third bedroom of this flat.

Also time to discover the reason for that partition wall.

Well, this is not what I was expecting.

Someone has tried to create a whole separate studio flat up here.

"What a great surprise!" you might be thinking.

But no!

Stop right there.

This property only has planning permission for usage as two self-contained flats

and not as three.

You need to ask your local planning authority

and apply for the necessary permissions to legally use this building

as three flats.

Never undertake any structural changes to a building

before you have the appropriate consent in place,

because you could be forced to undo all your hard work.

So be warned!

And on a lighter note, look at the size of this bathroom.

Big. Mmm.

No, the proportions don't work at all.

This is more like a changing room.

Even if you could get planning permission to create a separate flat in the attic,

I think it would be much better used to create a split-level,

three-bedroom flat with the one below.

But what would a local estate agent advise?

Let's start with the ground-floor flat and that large extension.

A house like this, gardens are very, very popular

on ground-floor flats. They do give a good value to a flat.

So I personally would knock it down

and reduce this space and have a nicer garden

and still have a nice extension on it.

What would he suggest for the upstairs flat?

Should that be integrated with the loft conversion?

In terms of making profit,

my recommendation would be to try and get three flats out of it.

However, I don't think it works, and I think it'd have to be two flats.

I think you'd have to incorporate the studio flat with the first floor

to make a three-bedroom flat.

Looking at the first-floor layout,

the kitchen's too small, so I'd make it an open-plan lounge/kitchen.

The biggest change for me has to be taking away the partition walls

separating it from the upstairs. I think that has to be done.

And sale valuations for the two-bed ground-floor flat

and the three-bedroom split-level flat?

The two-bedroom on the ground floor,

with the small garden, would resell for around £300,000.

And the three-bed would be around £330,000.

What rental income could the two flats potentially generate?

The two-bedroom flat on the ground floor would be around £1,200 per calendar month.

And the three-bed spread over the two floors

would approximately be about £1,350 per calendar month.

Well, this property does have a rather unexpected

and confusing layout at the moment.

But it's substantial in size, which I love,

and it does offer up a lot of alternative options.

Now, do you revert back to two flats

or try to take this development further

by applying for planning permission for that additional third flat?

This is certainly an exciting, if challenging, prospect for someone.

Let's find out who felt up to the task in the auction room.

Mid-terrace building, arranged as two flats.

Two-bedroom and a three-bedroom flat.

400.

£400,000 on my right.

405 anywhere?

405 in the red.

410. 415.

420. 425.

There was plenty of interest on auction day.

We rejoin the action at 463,000.

463.

464.

465.

466.

466.

467.

468?

467 first time...

..second time...third and last time, if you're all done?

Sold, 467.

That final successful bid of £467,000

was made by Jez, a full-time property developer

with a portfolio of buy-to-let properties.

I met him at his latest purchase to hear about his plans.

Jez, this is great news - you managed to secure this on auction day.

What are you going to do with this place?

Obviously, it needs a complete refit.

All the windows will be changed, new electrics, new plumbing.

The upstairs, we'll change the layout completely.

It's a bit of a strange layout at the moment,

because they did the work as three flats,

but then the council refused them permission for three flats,

and they didn't bother changing the layout back to how it should be.

So we'll pull down all the partitions.

We're going to get rid of the inner corridor that's there at the moment

to increase the size of the middle bedroom.

We're going to move the bathroom over to the other side of the house to gain a bit of light from the window.

And we're going to move the kitchen to the rear wall

to open up the front of the property.

And in the loft, we'll reduce the size of the en suite to a more sensible size

to increase the size of the bedroom area.

And the flat upstairs, which will end up being a three-bed, two-bath,

will be a really good rental machine.

Tell me what you're going to do downstairs on this floor.

Down here, the layout will stay the same, but obviously,

completed refitted.

The inner wall of the extension will have to be rebuilt

because it's so damp.

We'll replace the glazing above it.

I can't help but feel this room is too big,

while the garden is tiny.

Would you re-address this room if you're doing the extension anyway?

I think you're right. It's a perfectly valid point.

But on the flipside, there is a lot more added expense to rebuilding the rear of the property

and nine months of the year, you can't really use your garden with our weather.

So I think having the massive space inside will be

a big draw for any potential buyers.

I can see where Jez is coming from,

but I'd like to reduce the extension a bit

and gain some more garden,

putting some bifold doors in to make the most of the outside space.

What sort of budget have you got to spend on these two flats?

Quite a bit, actually.

With all the layout changes upstairs and all the glazing changing,

I think the budget will be about £80,000.

That's a realistic budget.

Jez is on the ball here,

and intends doing these flats up to a high standard.

Do you have a team of builders ready to start work?

I've got a fantastic project manager called Lucas,

and between us we know all the trades we need in the area.

We'll call them in as appropriate.

Jez and Lucas must know some fast workers,

because he's set an impressive schedule of just four months

to get the two flats finished and on the market.

Before becoming a property developer,

Jez worked in banking, providing finance to other property developers.

He's also self-built his own house in Clapham

and currently has about ten buy-to-let properties he rents out.

You've got a lot going on. You're a busy guy. How do you find the time?

By working evenings and weekends when necessary as well.

And I'm going to get even busier because I've now got a wedding to plan,

-because my girlfriend recently became my fiancee.

-Congratulations!

-When do you hope to get married?

-We hope to get married this summer,

but then maybe have a bigger party next year, when we've got time to plan it properly.

I do hope to earn enough from this project

-to pay for the wedding.

-Good luck with the wedding.

-I hope the project goes well, and we look forward to seeing what you do here.

-Thank you.

Thank you very much.

It's a complicated property, but he really knows what he's doing.

So it seems like Jez is the guy to fix it.

He's certainly got a lot on his plate,

as the property needs a lot of grooming.

And it's no small feat to take on.

You can find out if this has been a match made in heaven later in the show.

We always like to think our buyers set themselves realistic timescales and budgets.

There's only one way to find out,

and that's to revisit them after they've done all their hard work.

We now return to Burslem in Stoke-on-Trent

to see how David got on with his substantial

but standard red-brick terrace.

He bagged it at auction for £48,000,

but had a special reason for developing his portfolio.

I've got two boys. They've got moderate learning difficulties.

So just trying to get a bit of a nest-egg together,

to support them when they're a little bit older.

Fantastic. With a view to them living here?

Potentially, or they can sell them and move to something else.

Two and a half months later,

the place has been magically transformed.

# Could it be magic?

# Now

# Now

# And hold on fast

# Could this be the magic at last? #

David and his team of builders have done a lovely job

and well ahead of the three-month schedule they set.

And he's already got a tenant.

I didn't predict that.

The old kitchen before, we've extended and made it a bit bigger.

There used to be a wall at the back there.

Very pleased with the kitchen.

The way that it's worked out has been a bit tricky

in configuring -

which appliances should go where -

but working with the tenant and knowing what equipment she'd got to put in there,

we came up with what we think is a good solution.

In the bathroom, it's been made a bit smaller.

We've taken some of the room out and extended the kitchen.

We were worried that

that might make the bathroom a little bit too compact,

but very happy with how it's turned out.

We managed to recycle the toilet and the sink.

Bought a new bath and a thermostatic shower.

Chrome radiators...

And I think that the finish and everything in here is very nice.

The roof was another huge part of the renovation -

loose ridges, flashings and tiles

meant a major overhaul was necessary.

We've done the roof.

We've done a damp-proof course, electrics,

plastered all the way through,

new central heating...

and decoration all the way through.

David had a budget of up to £18,000.

Did that estimate match his actual spend?

There were some unexpected costs that we incurred,

such as a couple of the lintels in the main building,

we found out were wooden and rotten.

So we had to replace those,

and also the wall at the front of the property

was falling down,

so we had to rebuild that, so those were additional things we hadn't budgeted for originally.

I am just waiting for two final invoices to come in

from two suppliers,

but my estimate at the moment is that it's come in at £18,247.

The two boys were involved in quite a bit of work and have been here

most weekends, helping us do various bits and bobs.

They quite enjoyed smashing the old kitchen to bits

and ripping out the old bathroom

and were also involved in stripping the wallpaper off the walls upstairs before we skimmed them over.

So they've thoroughly enjoyed it.

The boys are interested in property.

They watch your programme all the time on the TV.

And hopefully, yes, this is something they may be able to have the capacity to do when they're a bit older.

We've bought this property for their portfolio for later on in life.

Hopefully, we want to get to about five or six, and that will give them

a good start in life.

While the boys are still young,

what does David intend to do with this property?

The plan for this property is to let it out long-term.

We've already got a tenant that's just moved in this week

and she's very happy with the property.

So, is David getting the correct rental value for his investment?

We asked two local estate agents

for their opinions on this house.

My first thoughts are they've done a very good job with the property.

Very well presented all through. Nice new kitchen.

I can really see they've spent some money on the place.

I think with how they've finished the property off, it will appeal to

purchasers and tenants alike.

Very neutral colours all throughout the house.

Nice and modern,

nice and clean.

They've done a real good job of the place.

I like the kitchen and the bathroom.

The finish on these is to a high standard.

First impression of the property -

it's been modernised to a good standard.

The finish applied to the property has come out very well

and certainly for the rental or sales market, it's a good property.

Could David have done anything else to improve the property?

I think in terms of enhancing value,

they've pretty much done as much as they can do.

The new kitchen, new bathroom,

replaster, rewire... They've done all the essentials.

They've made the kitchen a little bit bigger.

So, yeah, I think they've pretty much done as much as they could have with it, really.

So what kind of rental could it attract?

I think if this was placed on to the rental market,

you could be asking somewhere around £400 per calendar month.

In today's market, I'd recommend £400 per calendar month.

Yeah, that's about the right level.

We're getting just above that, so, yeah, happy with that.

So he should be, because David's already achieved a yield of over 7%.

What about selling it?

In today's market, I'd recommend an asking price

of around £70,000.

I think if he was to place it on to the open market for sale,

I'd be suggesting he places it on the market

somewhere around £65,000 to £70,000.

I would like it to be at the top range of that,

but as I'm not selling it, it's not really that much of an issue.

It's a long-term investment.

Were David to sell now,

he'd make a profit of £4,000, minus tax and fees.

By letting the property, he's achieving a healthy yield

on his £66,000 investment.

So, would he do it all again?

I've thoroughly enjoyed it.

It's perhaps something that I'll want to do perhaps once a year.

Now it's back to Streatham in southwest London.

Earlier we saw this mid-terrace building

sell for £467,000.

On the ground floor, there was a two-bedroom flat,

which featured some very worrying damp

and a postage-stamp-sized garden.

Upstairs there was another split-level flat,

which had been divided off with some really claustrophobic corridors

in an attempt to create an attic floor.

It just didn't work.

The hotch-potch was bought by property developer Jez.

You've got a lot going on. You're a busy guy. How do you find the time?

By working evenings and weekends when necessary as well.

And I'm going to get even busier because I've now got a wedding to plan,

-because my girlfriend recently became my fiancee.

-Congratulations!

-When do you hope to get married?

-We hope to get married this summer,

but then maybe have a bigger party next year, when we've got time to plan it properly.

I do hope to earn enough from this project to pay for the wedding.

A wedding can be a very expensive affair,

so let's hope he's managed to make that profit.

And only four months later, we're back to find out.

# Pink confetti has flown everywhere

# These days go by so fast... #

On the ground floor, there was a two-bedroom flat initially.

And there, we haven't actually changed the layout at all.

All we've done is renovate the existing layout

and we have ended up, I think, with a very nice, spacious, two-bed flat.

Jez and his team of builders

have not just given it a modern and clean look -

they've also put in new electrics, plumbing, double glazing,

flooring and carpets throughout.

They've also made a slight improvement to the garden.

Just take a look at that ground-floor kitchen

and living space now.

Well, here in pretty much the same position,

we've installed a brand-new kitchen with high-gloss units,

integrated appliances and a nice solid oak worktop,

which I'm really pleased with.

Here in the main body of the room,

if you recall the beginning of the project, this extension wall

was completely rotten with damp.

So we took the decision to demolish the whole thing

and build up from the ground again with a proper wall

and brand-new glazing to current standards,

and I think the overall effect is fantastic

and we've ended up with a really lovely living area.

So it's looking terrific down here,

but what about upstairs in the flat above?

In the first- and second-floor flat,

it was a complete mish-mash of a layout.

It was a three-bed, two-bath flat.

So what we've done is actually enlarged the en suite slightly,

turned that into a bedroom

and squeezed an en suite into the master bedroom on the first floor,

so now we've actually got a four-bed, two-bath flat,

which actually works really well

and I'm really pleased with the result.

It's a clever restructure,

gaining an extra bedroom whilst keeping two toilets.

And talk of clever reconstructing,

look at what they've done in that front room.

And if you're wondering where that kitchen's gone,

look on the other wall.

Jez has created two lovely flats here,

but as he discovered, it's what's lurking underneath

the surface of a building that really counts,

and he also inherited some poor workmanship done over the years.

We found that the drainage they'd installed

was completely rubbish -

full of holes - and that was creating all the damp through the brickwork.

We then uncovered a bit further and found the cavity wall they'd built

was not anywhere near up to current regulations.

Now, there's obviously no damp problem at all.

It's got a proper lead gutter on top,

and the results are really great.

Jez commissioned a structural report that turned out to be very wise,

because there were no rolled steel joists, or RSJs, as they're known.

Quite an important omission,

as those are the beams that hold up a building.

The second floor could have collapsed into the first.

The first floor could have collapsed into the ground floor.

And actually, there was also a chimney breast that wasn't supported at all.

It was just overhanging a bedroom.

So, in theory, if there had been high winds or something,

a whole chimney breast could have fallen into a bedroom

and obviously potentially killed someone.

# You're an accident waiting to happen... #

Do always be aware of bodged building work.

It's not just electrics and gas that can catch you out.

Poor structural work can cost lives

and while that's the most important cost,

it can also cost you time and money.

Initially I said, on the best case, they would take three months.

Worst case, four months. And we did actually use the full four months in the end,

because of the various bits of extra work we had to do.

The budget that was initially £80,000

has actually moved up to about £100,000,

because we did have to do some extra work,

extra structural work,

and then we did take the decision on the extension to knock down and rebuild the wall there.

So, with a few things like that,

we have, you know, gone up a bit.

But at £100,000, I still think we've done a pretty good job.

Hopefully, that additional spend

doesn't mean he'll have to skimp on vol au vents or champagne

at the party to celebrate his wedding.

In fact, he's already had some interest.

Both the flats went on to the open market

even before they were finished.

And I was very pleased to see that very quickly we had offers on both.

And they're both now under offer.

The ground-floor flat is under offer at £330,000

and the first- and second-floor flat is under offer at £368,000.

Jez knows what he wants for the flats.

If he achieved those figures, he'd make a profit of £131,000.

But has he pitched them at the right price?

We asked two local estate agents for their thoughts on the two flats.

The ground-floor flat with the open-plan kitchen/diner

is very spacious, and having a garden helps.

The favourite things I like about the flats are

the real spacious, light and airy feel they have,

especially in the ground-floor flat,

with the glass panelling... lets in all that light.

It retains some period features up in the second flat.

And the good size, good proportion bedrooms.

The standard of finish is very high

and it would appeal to especially first-time buyers and young families.

So a thumbs-up for all the work he's done,

but has Jez got his figures right?

Let's find out what they think these flats could sell on for.

The ground-floor flat would achieve in the region of £325,000 to £350,000.

The ground-floor garden flat I would value for £350,000.

The first-floor flat would achieve in the region of £375,000.

I would value the first- and second-floor split-level flat

for £375,000.

Well, I'm very pleased with them.

They're about right. I'm most interested in getting a quick sale

to move on to the next project,

so I've actually already accepted offers for the ground-floor flat of £330,000

and the first- and second-floor flat of £368,000,

which I'm perfectly happy with.

With a profit of £131,000, minus tax and expenses,

Jez has come out of this well.

Now, that's enough for a pretty good wedding party!

Well, we actually already went through the formality

and we are officially married.

We had a very small ceremony, but hopefully next year,

we'll have a big party and I think the profit from this

will definitely go towards paying for that party.

Martin, those stories have now been added to our archive.

But there are always plenty more,

so join us next time for more Homes Under The Hammer.

-Goodbye.

-Goodbye.

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