Episode 28 Homes Under the Hammer

Hello, and welcome to the show.

Now, with the property market in a state of flux,

everybody has to make their own decisions.

You have to do your research and trust your own instincts.

Yes, and you need to find out what's going on.

One way you can do that, is by going down to your local property auction.

Martin, it's true, isn't it?

Sometimes you just know you've got yourself a bargain,

and other times you're not quite sure.

Well, one way to find out is to test the market,

so, did the buyers on today's show get themselves a bargain?

Let's find out. Here's what they bought.

Today, we're searching high and low for property bargains.

I'm searching high in London. Take a look up there.

Can you spot what's wrong?

And I'm searching low, in Gillingham, Kent.

Whoa, whoa, what is that?

Whilst in Lisburn, Northern Ireland, I don't have to look far at all.

So, that's the first job on the list, then.

All of these properties have been sold at auction.

We'll find out who bought them and what they paid for them

when they went under the hammer.

Sold.

Ladies and gentlemen, for our first location,

we have to solve a mystery.

Shall I start by giving you a few clues

about which part of London I'm in?

Number one, Stratford is located a five-minute drive down the road.

Number two, there's a tube station

with services that take you into central London in under 30 minutes.

Number three, it's an area that's well-known for being the birthplace

of the famous film director, Sir Alfred Hitchcock.

Have you guessed where I am yet?

Leytonstone, that is where I am.

Now, I'm going to cut for a moment

as it's a little more than 39 Steps to today's property.

Let's get going.

Wow, well, there's no mystery

as to why prices are creeping up in this area.

It's the Olympic effect, and the property is just a five-minute walk

from Leyton tube station.

Along this row of terraces is the flat that I'm here to see today.

It had a guide price of £110,000

and it's described as having three rooms.

Now, I assume that means a lounge and two bedrooms.

Let's head inside and get to the bottom of that.

The flat is on the first floor of this attractive period property.

Up the stairs and what are we going to find?

Oh, it's great to have this double-height window here,

letting in lots of light, quite a few stairs to climb.

So, let's have a little wander around.

Quite a small room through there. Probably a bedroom.

You've got a very squeezed bathroom

with a ceiling coming at you like that.

Through there, not ideal I'd say.

And this is the kitchen, so quite a good space.

Yup, you've got the units, needs a bit of a tidy up,

there might have been some sort of leak in the ceiling

because part of that is hanging down.

You can see there's been a bit of damp around the window area.

So where's that third room?

Is it through here?

It must be.

I'm very intrigued by this third room. Up more stairs to find out.

Now, I did have my suspicions, but judging by this steep staircase,

I don't think this room complies with building regs.

Now, it's not been legally converted into a second bedroom

and tall people beware,

the ceiling height is a little low over here and here.

I would recommend speaking to the local council

who will advise you how you can convert this space officially.

At the moment, you could only use this as a play room or for storage

and I think it will be well worth spending a bit a bit more

so you can call this bedroom number two.

Now there's something in here that I am really quite worried about.

Take a look up there. Can you spot what's wrong?

It's crooked and that's at the top of the window frame.

You can see it just falls away. It's tilting to the side.

In fact, this whole kitchen floor runs this way.

Thank you. It's a sure sign of subsidence.

Now alarm bells ring because it's expensive to rectify,

and it always makes future buyers very wary.

Subsidence equals stigma, I'm sorry to say.

Now, the first thing to do

is to get a structural engineer to investigate.

Best case scenario - it's historical

and you'll need to fix the results of it.

Worst case scenario - a big bill

and further complications could ensue

because this is a lease-hold flat

so would you get the cooperation needed to do any remedial work?

It's guided at 110,000

so does a local agent think that odd upstairs room

is a place to add value?

If they're looking to resell the property,

I think it's a good idea to put a dormer window and extend upstairs.

If you're looking to rent the property, it's not worth doing it.

The dormer extension would add around ten grand

onto the resale value of the flat,

but as long as you have the use of the second bedroom,

the size wouldn't affect the rental figures.

Time to talk potential values for once this flat has been renovated.

As a one-bedroom flat with attic space,

we can resell this property at a price in between £170-180,000.

As a two-bedroom flat, after renovation,

the property could achieve around £220,000.

And rental figures?

After refurbishment, one-bedroom flat,

it can achieve between £950 and £1,000 per calendar month.

As a two-bedroom flat,

we can achieve between £1,000 and £1,100 per calendar month.

Well, this flat does have a few issues

but it could make a worthy investment

once they've been rectified,

particularly with the extra potential of that top floor.

Now, I just hope whoever took this on

doesn't suffer from Stage Fright, in the words of Hitchcock.

Time now to head to the auction and find out

who was up for the challenge.

120.

Sorry, didn't see you, 120 sitting down.

121?

121 with you. 122. 123.

124.

125.

126, 127, 128, 129.

130.

131.

With a packed house,

there was plenty of bidding on this property

and we rejoin it at 142,000.

142, first time, second time.

Third and last - 143.

144.

145.

146?

145, sitting down, gentlemen. First time, second time.

Third and last time, if you're all done.

Sold, 145.

And the successful bidders paying £145,000 for the flat

were Howard and Shane on the left, both from Northern Ireland.

Shane owns a business that manages property companies

whilst Howard is a new build developer.

The men bonded over their shared love of property

and decided to set up a part-time renovation business together.

They're now focusing their attention on the London property market

and here we are at their latest project.

Time to find out more.

Shane and Howard, congratulations, lovely to meet you.

Good to meet you too.

I want to know the story and why you wanted to buy this flat at auction.

We're looking at a number of different properties

in the south west of London.

And they all exceeded the price that we were prepared to pay for them.

And then me and Shane were sitting there and erm...

..thought we might try to pick up something, at smaller money.

We seen this lot here.

We had comparables on it,

we thought there's a bit of meat on the bone here.

-Right.

-And then the hammer dropped us at £145,000 for this property.

-The deal was done.

-The deal was done there.

So there's a bit of meat on the bone here, so you say.

But by the sounds of things you hadn't looked at the flat.

No, because it doesn't matter where you buy so long as you buy it

at the right level so that's how we've come up with this.

How often have we said it on Hammer?

Please don't buy blind, no matter how many comparables you have.

This flat has real issues

and subsidence and steep stairs aren't necessarily in the catalogue,

so Shane and Howard had no idea about them.

So 145,000.

Now you've seen it, do you still think you've got a great deal

-and there's still meat on the bone?

-Yeah.

-Really?

-Yeah.

OK, so the hammer went down, you'd bought the flat. What happened next?

We knew this was sold, not as a two-bedroom flat

but as an attic room.

So then we had to see about planning permission

to make sure we can get that sorted out.

Then we had to get in contact with the freeholder.

Who started saying there was issues with subsidence here, with this flat.

So then we're like, that's not very good for us that there's problems.

But he said he would sell the freehold so then we thought,

if we can buy the freehold, we can fix the subsidence problems.

So then we thought we can do a lot ourselves.

With our own builders, basically,

and then we can be in control of the situation.

So basically then we went to the downstairs guy,

the owner who bought it at the last auction.

And we've since then purchased that off him.

Wow, so you've now got not just this flat, the flat downstairs,

you also own the freehold which is great news.

They bought the downstairs flat for £145,000

and the freehold for 15 grand,

meaning they have spent 305,000 on the whole property so far.

Now the good news is

that their structural engineer has told them

that the subsidence is historical

so hopefully it isn't getting any worse.

Bad news is,

not only is there no planning to convert the attic into the bedroom,

the conversion of this building into two flats

has never been approved either!

Thank goodness they bought the freehold.

You don't think there's going to be any problem keeping this

as two separate dwellings?

No, we don't see an issue currently with planning.

We had the architect in looking round and he's very happy.

And the submission has gone in now to have it right for the end user.

But, you know, Plan B wouldn't be so bad either,

to turn this into a family house.

That was in the back of our minds

when we were buying the freehold and the flat below.

If everything does go wrong, if the planners say no for whatever reason

then we always can convert it into one house and still come away happy.

-So quite smug there, then?

-We were.

-Quite smug.

So what do you think you're going to do to really turn this place around?

The roof.

The roof's coming off on Monday and basically,

strip everything you see here out

take off the joists and all the roof rafters have to come off,

and then, basically, strip. All the walls have been plasterboarded over.

We'll expose everything, basically, and start again.

It's fantastic, what you guys are doing.

You're going to strip it back to the bare bone

and give it every chance it can possibly have

and then remedy everything, rectify the problems.

-And dress it back up again.

-Yeah.

-We've done it in the past, so...

And obviously, it's a lot of headaches and stuff

-but that's part and parcel of the game, I think.

-And downstairs?

There's different structure walls that we're going to take out

to make it a two-bedroom property

with a nice kitchen/living out onto the garden

with the bathroom in the middle.

Now you've got not one, but two flats,

what is your budget for the work?

-75,000.

-75 grand. Do you believe you boys can do it for that?

Yeah, well, if we spend 85 it's not going to be a crisis

but you have to sort of set a target and work towards it.

Cos it will be all the same issues that you only look upon

when you start the property. But that's a rough target.

Good luck, I can't wait to see what it looks like when it's finished.

I hope it all goes to plan, well done.

-Thank you very much.

-Lovely. Thank you.

So Shane and Howard have bought not one,

but two flats as well as the freehold of the whole property.

A sensible investment, or double the trouble?

You can join me later in the programme and find out what happens.

If you want to commute,

then Gillingham in Kent might be a good departure point,

with a fast train to London and good access to the M2 and M25.

If you're arriving, then you might want to study

at one of the three universities in the busy town.

All good pointers for your savvy property developer.

Well, just five minute's walk from the high street,

and more importantly, just five minute's walk from that train station

is the property I'm here to see.

Now, it is on this fairly busy road, but look at the size of the house

and, baring in mind that we're 45-50 minutes from central London,

what do you reckon the guide price is?

120,000 quid?

Whoa, pretty impressive entrance with some of the original features.

Clearly not in the best of states but... Ooh!

OK, first of all,

into what would have been, I imagine, a living room

when the house was first built, now it looks to me

like it's been converted into a kind of bedroom but it's a good size.

Obviously, the house is in need of a bit of tender loving care

but you've got a lot of space.

Through that door into this,

again, converted into some kind of a bedroom.

Nice high ceilings though

and some lovely features with these windows,

though a window like that would need to be double or even triple glazed

otherwise this room would be a fairly unpleasant place to be.

But it is a bit of a labyrinth.

Through here, to more of the sort of communal facilities of the property.

Down there there's some loos and then this way,

through into the kitchen. Now, I say kitchen.

It is a space which has a few kitchen-esque type things in it.

Needs some time and effort spent in here though.

But as a shell, it's a really good start.

This property must have once been a fabulous Victorian home.

What a scale to live in.

But now, as a house divided, it's certainly practical, if a bit tatty.

Would you rearrange this? I don't know yet.

So, onwards and upwards.

What's actually quite nice is that the staircase area isn't too big

so it isn't detracting from the size of the rooms

and lots of light coming in too.

I know there's work to be done

but at least what you've got to work with, I think...

..has huge potential. More rooms to explore.

It goes on and on.

There are three rooms on this first floor

and all good Victorian-sized rooms they are, most with a sink.

Onwards and, I'm afraid, upwards.

Well, up on to the top floor and the final two rooms.

They're in the attic but quite nice.

You've got this really good head height which is sort of unusual.

This makes another let-able two rooms. I say let-able

because that's exactly what this house was used for,

as a house of multiple occupation.

The good news about that is

it's obviously been approved for that use

and clearly, looking around, it's going to need modernisation

and bringing up to standard

things like automatic closing doors, fire alarms and things like that

which are up to current specifications etc. etc.

But the principle has been set for this to be a licensed HMO

and, in my experience, they can be a really fantastic money earner.

Quite rightly, there are strict rules and regulations

when it comes to houses of multiple occupancy.

Everyone in the house has to have adequate kitchen and toilet facilities,

and also all the occupants have to be safe,

so whilst a money earner,

there are serious responsibilities that go with it.

Whoa, whoa, whoa, what is that?

There's an electrical socket and I better not touch it any more.

As you can see, it's in a right old state, completely burnt out.

Whenever you're looking round houses,

you've always got to be on the lookout for clues

as to the state of things you can see and of things you can't.

That's obviously got burnt out.

My guess would be somebody's put something like a heater here

or something that was just overloading this socket.

But you don't know what it's done to the wiring

hidden behind the wall there

and my guess is the whole thing is going to need rewiring.

A little clue.

(Don't ignore them.)

So, add a rewire to the list of tasks needed

to upgrade this HMO to a decent and safe standard.

There is a lot to do,

but with the possibility of the rental potential of individually let rooms,

the investment could reap good returns.

So, we asked a property expert to give us the

benefit of his local knowledge.

It's clear this property has been used in the past

for some considerable time for students, for multiple occupancy,

so I would certainly suggest

that's where this property will remain.

If it ain't broke, don't fix it, eh?

So, why does it work so well?

Ideal for students

because the town centre is approximately 500m up the road

and really useful for Medway University.

So, there is certainly a good niche market you could cater for.

What sort of income could you get for it?

You're looking at £80 per week per room.

Single rooms locally are going for £70 per week per room,

so a terrific investment whichever way you look at it.

Well, all the rooms are doubles so with seven rooms at £80 per week,

you're looking at potentially £560 per week for all the rooms.

And what about the property itself?

Modernised, will it hold its value for resale?

Provided all the current building regulations

and fire regulations are adhered to for a student let,

then we see no problem at all in the current market of achieving £200,000.

Well, there's lots of really good things going on in the area

and you are certainly getting a lot of house for the money,

which could turn out to be a really profitable venture for somebody.

Let's find out who bought it when it went under the hammer.

Now we move to Lot 43. Substantial end-terrace property.

Accommodation arranged over the ground, first and second floor.

We've got a guide of 120-130. Start me where you will.

£120,000 anywhere? Bottom end of the guide. 120,000, do I see?

110 then. Must be worth 110. 110,000 I have, thank you.

112 and 15, and 15, and 17, and 20. And 20 and 22. Anyone, 25?

125, thank you. £125,000, gentleman in the blue.

127 do I see?

At £125,000 then. It's being sold in the room.

At 125,000 then for the first time.

At 125,000 for the second time.

125,000 for the third and final time, 125,000, are you all done?

Sold at 125, congratulations.

The successful bidder was Abed,

who bought the property with his wife, Lubna,

as an investment property for their children.

Lubna is a GP while Abed is a stay-at-home dad

who sees this property as a great project

that he can fit around his main job

of looking after their son when Lubna is at work.

-Abed, Lubna, great to meet you both.

-Hi.

-Thank you.

-Congratulations.

Thank you so much.

So why this particular property, then?

This particular one is very close to the high street

and very close to the train station.

And there's potential here, like students. That's why I bought this.

Were you happy with what you paid for it, though?

Yeah, very, very happy because this sort of property...

..could be around, like, maybe 200,000.

I was thinking maybe this property would go over 150.

But I was very shocked when the hammer go down on 125.

I'm really surprised and very happy.

It's always reassuring to hear that people have done their research,

know the area, the property prices and what the potential market is.

-So, Lubna, have you done anything like this before?

-No, not really.

-Really?

-First time.

-Wow!

-Yes.

Abed had this idea that, you know,

I want to invest some money in a property

and I thought that was a good idea.

What did you think about the house when you first saw it?

I thought it was very good. It's very big, seven bedrooms.

It's got potential to do lots of things with it.

And I think Abed's been discussing with friends

and professional people as well about what we could do with it.

So tell me about the plans then, what are you going to do to it?

I think I can achieve five ensuite one bedsit studios.

If we have the old facilities in their own place, I think

this way, we'll be dimensionally happy.

That sounds like a really good plan.

A happy tenant equals a happy landlord.

If you provide good living accommodation,

your tenants will likely stay longer,

meaning no constant turnover and empty units.

And they will take pride in it too

and that all means a better return for the landlord.

One bedsit studio flat

around this area, I think...

..500.

So if you've got five of those

that's two and a half grand per month.

-Something like that, yes.

-That's pretty good.

That's what I'm thinking.

So it all seems to be making sense on paper.

Self-contained bedsits

which still come under the category of a house of multiple occupancy

do provide more personal autonomy then just individually let rooms,

however, it's worth baring in mind

that individual kitchen facilities in each flat,

may reduce those arguments that come with communal living

like other people's dirty dishes in the sink,

but it might increase your refurbishment costs.

Abed's plan of action involves reskimming all the rooms,

replacing the carpeting, putting in new windows where needed,

as well as all the upgrades necessary

and each flat will have a little kitchen and shower room.

He hopes to do this in four to five months, with a budget of £20-25,000.

So, will GP Lubna find any time to help?

-It's to my kind of, cup of tea.

-Isn't it?

-No.

-Which bit of it isn't your cup of tea?

-The whole bit.

THEY LAUGH

-I'll just see the end piece.

-The end product, OK.

-So if this is a success, will you do more?

-Definitely.

Once I've finished this, yes, I'll go for another one.

-Well, congratulations.

-Thank you.

-Really great, look forward to seeing how you get on.

-Thank you.

-Good to meet you.

-Thank you.

Well, quite a project for Abed to take on.

Lots of work to be done and is his plan for converting this

into five self-contained units the right way to go? Time will tell.

Hopefully, though, with Lubna's help,

this place will get a clean bill of health.

You can find out how it all turns out later in the show.

Coming up - there aren't too many negatives to be found in this property.

There's a lot going on here which I think is very positive.

And there are positives for Abed too, in Gillingham.

We're quite happy because the builder who done the job for us,

they done it quite well.

We return now to Leytonstone,

which is in easy commuter reach of central London.

The property we looked at earlier was a three-roomed flat

in this end-terrace house.

So, let's have a little wander around.

Quite a small room through there.

You've got a very squeezed bathroom

with the ceiling coming at you like that.

And this is the kitchen so quite a good space.

So where's that third room?

Judging by this steep staircase,

I don't think this room complies with building regs.

So that means that this can't be described as a second bedroom.

This property certainly has its downs and ups.

Take a look up there.

Can you spot what's wrong?

It's crooked and that's at the top of the window frame.

In fact, this whole kitchen floor runs this way.

So a sure sign of subsidence,

which gave new owners Howard and Shane some unexpected issues.

They hadn't viewed the property before buying it for 145,000.

But then this down led to a very promising up.

We had to get in contact with the freeholder

who started saying there was issues with subsidence here, with this flat.

But he said he would sell the freehold.

We thought, if we can buy the freehold,

we can fix the subsidence problems,

So basically, then we went to the downstairs guy.

The owner who bought it at the last auction

and we've since then purchased that off him.

A fantastic result in fact.

Now, with the two flats and the freehold under their belt,

they were good to go with a budget of 75 grand

and a timescale of three months.

We returned six months later to see the results.

Wonky camera angle not withstanding,

the structure looks fairly even so what about that subsidence problem?

Structural engineer was very happy

with the state of the current building.

The movement that was shown was from quite a long time ago

and there's no telltale signs of any movement recently.

Recently within the last 30-40 years.

That is good news.

The boys' budget would certainly have been on shaky ground

if they had major underpinning to do.

As it was, they did work on the gable wall,

taking it down and replacing the joists.

Now, there was also that small issue

of whether they would keep the building as two flats

as approval had never actually been granted.

So, will there be two flats here, or one family house?

Two flats, fantastic.

Well, that's the upstairs flat, what about downstairs?

The downstairs flat was reconfigured.

We basically moved the kitchen from the middle of the flat

to the back onto the double door of the garden

and then where the small bedroom is, there was a bathroom originally

and therefore we made it a purpose-built two-bedroom flat.

And remember that dodgy attic conversion?

Here we are in the loft bedroom, as such. The attic conversion.

This was done to create the full dormer.

Originally there was a conversion here

and there was obviously no bathroom,

which we've managed to create now, a small ensuite,

which makes this feel like a proper master bedroom.

It's turned out very well.

In the end, Howard and Shane were able to get planning permission

for the conversion of the house into two flats and the attic conversion.

That's a relief.

So with all that,

how did the original budget and timescale hold out?

So the original budget was 75,000 but it's now 95,000 but obviously,

we didn't envisage the amount of work that had to be done.

At the start,

we initially had a target of three months to do the full works.

When we started the project,

there was a bit more work than we first anticipated

with the attic conversion so all in all, we completed within four months

and we're happy enough with that time frame

and we're very happy with the end result.

So, two flats, plus the freehold for 305,000

and £95,000 in renovation costs, makes a grand total of £400,000.

So, will Howard and Shane stay happy?

We asked two estate agents to give us their thoughts.

This is my second time at the property

and I think the changes are very good.

In fact, the house looks excellent

and the works being done are very, very high-standard.

The ground-floor flat has been set up very nicely.

As soon as you enter the flat, you've got a bedroom

as soon as you come in

and then you've got a really well set out bathroom.

That's done up to a very high standard

like the rest of the flat to be fair.

You've got a nice open-plan kitchen with a nice skylight

looking into the lounge with access to the garden from the lounge too.

The layout of the first floor flat is very well thought of also.

It's two bedroom, two bathroom, once again we have two double bedrooms,

one of the bedrooms of which has an en-suite bathroom.

You've got an open-plan lounge and kitchen again.

This property would appeal to investors

who would like to buy the properties and let them out.

It's a very well-known area for renters.

The agents think that the ground floor flat would rent

for anything between 1,150 and 1,400 per calendar month.

The flat the boys bought at auction would rent for around the same.

The higher figure of £1,400 per calendar month

would give them a yield of over 8%.

The rental figures are very good for the area.

As I said, it's very close to the city, so

it would rent pretty easily so we're happy with those figures

but we're not going down the rental route, we're going to sell so

it's not going to concern us.

Fair enough. What about the resale market then?

If the owner would like to put the property on the market for sale,

he can achieve in between £310,000 to £320,000

for the ground floor flat.

The ground floor flat should be able to achieve £330,000.

And for the first floor flat,

he can achieve in between £305,000 and £315,000.

On the first floor flat, we should be able to achieve £320,000.

So, having spent the total of 400,000,

the potential profit before tax and expenses is between 215-250,000.

Not bad for four months' work, boys.

The focus was originally to buy the properties and refurbish them,

put them straight back on the market, and thankfully,

we've got them on the market and within a week we'd sold them

so that's kind of made up

for the little bit of time we lost in doing the actual work.

So we've sold them at 320 per flat

so it's a total of 640 we've sold for and our cost is 400,000 so...

Great result and, yeah, onwards and upwards.

I'm in Lisburn, County Antrim.

Lisburn got its city status in 2002

and is the birthplace of Ireland's linen industry.

The city was established near the River Lagan,

which forms a boundary between Country Antrim and County Down.

I'm on a really popular housing estate

about a mile from the centre of Lisburn.

An easy commute to the centre of Belfast

if that's what you wanted to do.

I'm here to see a 1960s mid-terrace.

The guide price was £40,000.

Now, before I even get to the property,

here's an interesting thing to note.

A lot of these houses

were originally owned by the housing executive,

like the council, housing association, etc, etc.

And as you can see, all bar this one,

have had some remedial work done on the front.

Basically, you can see the front of the property has got this plastic cladding.

That's over a wooden frame and over time they rot.

These were presumably in housing executive hands

when they were all repaired and done up like this.

This one, however, obviously wasn't.

So, that's the first job on the list then.

True, it's only a facade and shouldn't affect the structure

but still, it does want putting right.

But there are more clues out here

that reveal how the house has been cared for

or not.

So, what other jobs are on the list?

Well, little entrance area there, stairs up to your bedrooms,

then though into your main living area.

The first feeling you get is a little bit...

The ceilings, I mean,

they are standard height for a modern-ish house

but it does feel a little bit low so I think

one thing you need to think about, in that case,

is how you paint the room.

Really nothing dark on the ceilings.

Just painting that bright white would make a big difference.

But it's not a bad-sized space, big window,

obviously you'd want to replace that when you did the front facade.

Nice feature fire, that could be improved

but it's good that it's there.

And through to the kitchen.

OK, well, straightaway in here I can see a simple improvement.

There's a wall, fairly solid wall,

in between the main kitchen area here and like a little utility area.

I can see the reason why they designed it like that in the first place,

to keep that stuff away but, you know,

modern living is all about open plan so take out this wall,

really increase the size of the kitchen

and then you haven't got a lot downstairs,

just that front area there and then this main area at the back.

But suddenly you've turned it into a really useable family home,

and yes, it needs a bit of work, yes, it needs new units.

But with that guide price there's a lot going on here

which I think is very positive.

Let's not forget the guide price for this is £40,000.

So, providing upstairs is in a reasonable state,

renovation costs should be manageable for a tidy profit.

So, what is in store on the first floor?

Well, top of the stairs is your bathroom.

Nice pale pink suite, clearly could do with a bit of updating.

Useful storage space on the landing here then, and then three bedrooms.

I mean, they're not massive but neither's the house

so actually, in terms of the size outside

and what you get when you come inside, it is surprisingly big.

Brilliant looking radiator in the middle of the wall there, wow.

That is a feature and a half.

But, like the rest of the house,

it needs updating, it needs painting, it needs decorating.

Rounding it up, really great house for the money.

The house is small, but so is that guide price of 40,000.

And don't think you need to spend a huge sum

making it presentable for the rental market.

Time to find out from a local estate agent

if this house is really all good news or if there are any downsides.

In the present market, it's a very good time to buy

and as long as you buy at the right price

and the work is carried out satisfactorily,

then I really don't see too many downsides.

And certainly, I feel there would be a high demand for the property.

Good news.

So with high demand, how will that reflect on the open market value?

Having been renovated satisfactorily,

in my opinion, you'd be talking somewhere in the region

of 55,000, possibly, on a good day, up £60,000.

Rental valuation,

somewhere in the region of £400-£450 per calendar month.

If it was my property,

I would spend the money to renovate the property

and at that stage I would look at renting the property out

and I feel that certainly it is a very, very good long-term investment.

Well, there's a bit of modernisation required

and certainly a few structural changes

that would increase the usability of the property.

But it's a lot of house for that guide price

and as a rental potential

or just a good family home, I don't think you can go far wrong.

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

Lot number 64.

Guide price 40,000. We've a pre-auction bid here 35.

Any advance on 35.

We have a pre-auction bid of 35,000, and advance on the 35,000 we have?

36,000. Seated at 36. Any advance on 36,000?

Any advance on the 36,000? We've got 36 over here.

37, 37 we have. Seated at 37,000. Any advance on 37,000?

We have 37 here. All sure?

Last call at the 37. 37 going once.

37 going twice, we'll try it for you, the 37, sir.

The hammer didn't actually go down on the last bid,

as it didn't reach the reserve price.

That's the lowest bid deemed acceptable

by the person selling the property.

The bid was made by Noel, who runs a building company

and he thought he had the three-bed terrace in the bag for 37,000.

So what happened?

Well, I went out to try to pay for the property and I was told,

"No, you do not have it."

So the following day I got a phone call to say

could I up the price a bit, so I says yes.

So I upped it and the following day they rang me back and said,

"The property's yours."

That upped offer allowed Noel to acquire the property

for the guide price of 40,000.

Tell me why you wanted to buy the house.

Well, I liked the price and I liked the area,

and this is quite a good area and has high demand for further rentability.

Have you looked at what similar properties are worth, fully done up?

Yes. They're worth about 55-60,000 in this area.

A lot of people don't look at that figure

-and it's really important, isn't it?

-It is indeed.

I did a little bit of research and talked to the neighbours either side of this property

before I went to auction.

That's a great research tip. Talk to the neighbours if you can.

Nobody is going to have more local knowledge than them.

But there are other tools of course.

The internet, local estate agents and newspapers. Be thorough.

You won't regret it.

Tell me a bit more about you, what do you do?

-Well, originally I started off as a farm manager.

-A farm manager?

Indeed and we would have done a lot of building on the farms

in those days and then I branched into building myself.

And just before that, I was a foreman for a big building firm.

-So lots of building experience.

-That's right, a lot of experience.

And now you run a building company.

I run a building company, my own building company, yes.

And how often do you do your own projects like this?

Well, this is the first one I've bought at auction to do,

but I would do a lot for other people.

So what tempted you to do it for yourself for the first time?

House prices are at an all-time low and they'll start to increase

from now on, I think, in Northern Ireland so I thought I better get in.

It's been...

..a difficult few years, hasn't it?

It has been very, very difficult for the industry,

construction industry, in Northern Ireland.

-But there is a bit of a turn in the last 12 months.

-How bad was it?

About six years ago, this property would have been worth about 85,000.

-So literally 50% of what it's worth.

-Exactly.

This Northern Ireland experience is one sobering reminder

that property prices don't always go up, they can come crashing down.

So if you're thinking of going into development,

don't just focus on the potential profits. Look at risks involved too.

Sometimes the things that go wrong are not in your control,

but you might have to bear the consequences like negative equity.

On a more optimistic note, I think Noel is right

and confidence is returning.

So, tell me what you plan to do to it.

The first thing I want to do is the front facade,

put a brick facade on it, and a rear facade.

After that, a whole new kitchen and bathroom and redecoration inside.

-Right.

-New flooring.

-So basic major refurb.

-Exactly.

No major structural changes then?

No, everything structurally is perfect.

So nothing, just one wall in the kitchen to be taken out

-to make it larger. Other than that, that's it.

-Right.

-So what's the budget for the work?

-Well, I've got £15,000 of a budget.

That's my own time and effort

but I would hope to be well within that budget.

OK and what's the time-scale?

Two to three months, Martin.

I've other projects on as well so as soon as I can get it done.

And then is the idea, presumably, to rent it out?

Yes, I might test the market to see

if I can get 5-10,000 I'll sell it on, otherwise I'll rent it.

-Roughly what do you think you might get for rental?

-Between 450 and 475.

That sounds to me like quite a good investment

because that's delivering double-digit returns.

-Absolutely, absolutely, yes.

-Why would you sell it?

-THEY LAUGH

-What are you going to do with the money when you've sold it?

-Buy another one.

-Buy another one.

-Yes, indeed.

I reckon that Noel should hang on to this

once he's put all his effort into it.

It will bring him a good return on his money in the short term

and in the long term, will hopefully increase in value.

He could, of course, also refinance it to buy another property

but remember what I said earlier, always be careful.

Don't risk losing your shirt.

That is the plan, then, to move on to other projects?

I would hope so, yes. If this is successful for me,

I certainly will move on to other ones.

Obviously, the auction in your case was a little bit rocky.

It didn't quite go as it was supposed to go.

-Exactly.

-Did it put you off?

Not at all, I did enjoy the experience.

-I've been at several auctions before.

-Great.

-Well, listen, congratulations.

-Thank you very much.

-Good luck with it.

Indeed. Thank you, Martin.

Well, Noel getting himself a good property here at a good price

but he has done that thing which is really important

which is not get too carried away,

to check the prices of similar properties in the area

and then make sure his budget is not going to go over that top end price.

Great. In terms of sorting it out,

for a builder, it shouldn't be a problem.

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

Well, the plans and dreams sounded good at the time.

Months have gone by but have their dreams become a reality?

Let's go back and find out.

Back now to Gillingham in Kent where this large seven-bed property

was sadly lacking in a few essentials.

Through into the kitchen. Now, I say kitchen.

It is a space which has a few kitchen-esque type things in it.

In this labyrinth of a house,

it's certainly not just the geography

that's requiring a lot of attention.

Whoa, whoa, whoa, what is that?

Whenever you're looking round houses, you've always got to be on the lookout for clues

as to the state of things you can see and also things you can't.

So, quite a lot to get your head around here.

But with the property having most recently been used as an HMO,

a house of multiple occupancy,

it certainly has the making of being a profitable investment.

Husband and wife, Abed and Lubna, made the investment of £125,000

to provide some financial help

towards their children's future education.

Are they happy with their investment?

I was very shocked when hammer go down on 125.

I'm really surprised and very happy.

Abed planned to make the accommodation self-contained flats

with a small kitchen and shower room,

using a budget of £20-25,000

and a timescale of four to five months in order to do the work.

So, is there going to be teamwork involved in this refurbishment?

-It's not my, kind of, cup of tea.

-Isn't it?

-No.

-Which bit of it isn't your cup of tea?

-The whole bit.

THEY LAUGH

So smiles all round.

Will it still be smiles, or just fixed grins,

now that we have returned, four months later?

It's better than what we had imagined.

It looks much better than that.

So we're really, really happy with the outcome.

And the transformation from tired and dilapidated

to vibrant and sleek is indeed impressive.

And the addition of not only ensuite facilities

and a kitchen in each room, but a communal laundry area,

will certainly improve rental prospects.

For HMO you're supposed to have, like, six rooms in a building,

I believe and we had seven originally,

so we had to put it as two rooms into one.

Someone actually recommended us the builder, an experienced builder.

And we followed their designs and the layout.

We both were coming every day, nearly every day,

and we were enjoying and we could see the progress.

We had a vision before the build

that all slowly, slowly started coming true.

Having put their trust in their designer and builder,

how did the timescale work out?

In the beginning we thought it could take, like, four to six months.

We just completed in just over three months which is perfect.

We were quite happy because the builder who done the job for us,

they done it quite well.

Better than quite well, I think. How did that 20-25,000 budget bear up?

We were fine in the beginning.

When we were very close to completing this building,

then we were told a different price, which was shocking.

-But, luckily, we both managed.

-We've gone over, £18,000 over the budget.

Yes, when you look at the end thing it's brilliant.

Yes, I think it is worth it, but

getting the money at the time was difficult

and we had to sort of, you know...

..borrow and use lots of credit cards as well

so unfortunately that is the downside.

Using credit cards for this kind of thing is risky

and definitely not recommended.

On the upside, they do have a lovely property

with really nice facilities, offering any tenant some privacy.

Of the six self-contained flats,

the attic and the ground floor have a bedroom as well as a living space,

while the others are studio flats.

Abed wants to aim for professionals rather than the student market.

But I wonder if this will prove to be the right market.

No doubt two local estate agents can give us an idea.

Having been in here previously to see the amount of work that was required

and then coming in here now to see what they've actually done,

it's absolutely fantastic.

They've got kitchenettes in every room, the quality's good

and they've actually put down a really good-quality carpet throughout as well.

I really don't think that they will have a problem finding suitable tenants.

I think the owner has chosen the right path

with converting to studios and one-bedroom flats.

The size of the properties are perfectly acceptable. They are...

They tend to be towards the smaller end

of what people are looking for, but again,

studios are not expected to be large, generally,

and one-bedroom apartments equally, in this location,

are not going to be that large.

At one time this would almost have been a really good substantial home

but now, because of the area,

the only real target audience they've got is for the investment markets

and I really don't think they could have done any more than

they've done, they've done a really good job.

Having paid £125,000

and then seeing their budget go from 25,000 to 43,000,

giving a total spend of 168,000,

what sort of resale figure are we looking at here?

What we are selling more of at the moment

is two- and three-bedroom terrace house

so I would say the resale value on this property at the moment

is going to be no higher than £270-275,000.

I would expect, based on the monthly rental incomes,

to achieve a figure around £300-325,000.

Wow, not a bad return there then.

This would give Abed and Lubna a profit before taxes and expenses

of between £102-157,000.

-275 or 325 sound very good.

-It's very good.

Very exciting and very surprising for us,

we never thought we could achieve that much so we're happy with that.

But selling was never part of our plan.

Oh, well. Back to Plan A.

The flats will be let with all the bills included,

so what kinds of values would the agents put on them?

Including bills, you'd be looking at £400 per calendar month.

The agent thinks all the flats would fetch the same rental,

regardless of size, however the other agent has a different view.

The studio apartments, I believe would attract a rental value

of approximately £400-450 per calendar month.

The one-bedrooms, around £500-550 per calendar month.

The lowest of those evaluations

would give a still healthy yield of 17%.

I told you at the beginning, HMOs can make money.

So, how do the couple feel about those valuations?

We would love to get and achieve the top part of that quote.

But let's see how things go because it will cover our budget,

how much we've spent.

So, the smiles are still there, and no wonder,

but would they be prepared to tackle this sort of project again?

Oh, definitely. Definitely, I do want to do another one.

This is quite an exciting job for me. Yeah, I'd love to do that again.

Back now to Lisburn, Northern Ireland,

where this 1960s three-bed terrace was bought by builder, Noel.

His plan was to rent it out after refurbishing.

Noel bid £37,000 at auction,

but got a surprise when he went to settle up.

I went out to try to pay for the property and I was told,

"No, you do not have it."

So the following day I got a phone call to say

could I up the price a bit

-so I says yes.

-So you got it for 40.

-Yes.

Tell me why you wanted to buy the house.

Well, I liked the price and I liked the area.

Have you looked at what similar properties are worth, fully done up?

Yes. They're worth about 55-60,000 in this area.

Four months on, things are much brighter.

A new brick facade replaces the old rotten wooden and plastic one,

making the house look much more like its neighbours.

The rear of the property has had the same treatment.

Better to look at and there are some practical benefits too.

The old facade that was there was completely rotten

so there was a new inner studwork put up, insulation,

100ml plywood vapour barrier

and then a brick facade with a cavity in front.

With properties either side and new insulation front and back,

the house will be much cheaper to heat.

Enough about outside, what about inside?

Noel wasn't able to dedicate all his time to this property

as he had other jobs, so although it's been five months,

it only took 11 weeks to finish the work.

All the items that were put into the house were the new facade front and back,

new PVC windows and doors, a combi gas boiler,

brand-new kitchen, we took down a wall.

Downstairs toilet - the bathroom the bathroom that was in the property

was very dated, it was a pink suite

so we decided to put a new, clean, white suite in there

and then it was just a matter of decorating the bedrooms

and bringing the doors and latches

and things like that up to date.

New wiring and plumbing.

He makes it all sound so easy

and well within his original two to three month time scale.

But I've yet to hear of a renovation which doesn't have unforeseen problems.

Was that the case here?

The mains water entering the building has a stop valve called a Toby on it.

And that was non-existent.

The manhole was there for it but there was nothing there

so the stopcock within the house was seized.

So we had to get a freezing pack and freeze the mains coming in

so that gave us a few headaches.

A headache that would have put most people off, I'm sure.

But Noel, being a builder by trade, took it all in his stride.

With the kitchen/utility wall removed,

the space that was released accommodates

the new downstairs cloakroom and room for a small dining table.

The once dark skirting board and fire surround are now brighter,

the lighter colour-scheme making the lounge feel much more welcoming.

The bedrooms, too, have benefitted from a more neutral tone.

Noel had said that his maximum budget was £15,000

but he was hoping to spend nearer the £10,000 mark

by doing most of the work himself.

As it turned out, he was busy with other work

and had to pay more than anticipated on labour costs.

He reckons he still completed at £15,000

even with the high-spec kitchen and bathroom,

making his total spend £55,000.

No, certainly, when I started this project, I had a vision.

I could see where I wanted to go and what I wanted.

Unfortunately, I went a little bit over my budget

to achieve what I wanted, but I'm very happy.

Time to find out from two local estate agents

if they think it's been money well spent.

Noel originally said he'd like to sell the property,

but since the market hasn't picked up

as much as it has in other parts of the country,

perhaps rental might be better in the short term.

What do the agents think of the work he's done?

First impressions are absolutely vital

and I think the work that has been carried out

to the front facade of the property will make a difference,

will make the property appealing

and will make more people want to come and look at the property.

It's been fully refurbished and it's in excellent presentation

and that's important in the current market,

particularly where first-time buyers are concerned.

I think it will appeal to both the sale and rental market,

this particular property, because of the standard of finish

and nowadays, people are always looking for the best of the best.

Is this the best of the best, then?

What rental valuations would the agents suggest?

I would anticipate a rental value of £475 per calendar month.

I would envisage a rental

of approximately £450-500 per calendar month.

That's just a little bit more than I expected, but certainly,

I would be very happy with that moving forward, yes.

And Noel is right to be pleased.

It's a yield of over 10% on his total spend of 55,000.

And would there be a profit, if he decided to sell?

Demand for properties in this condition, in this location

are very good at the moment,

and the proximity to the city centre would make it very popular.

I would anticipate a good response

and a value in the region of £70-75,000.

The value would be somewhere in the region of £70-75,000.

Certainly, that's a lot better than I thought.

And I'm very, very happy with that figure,

certainly, about £15,000 more than I would have expected.

Best case, that would give Noel a potential profit

of £20,000 minus the usual taxes and expenses.

But he's decided to hold on to the property

as a longer term investment.

As the building process was going on, we've had people passing by,

knocking on the door, literally.

Well, when there was a door!

And asking, could they rent the property,

and how much did I want for it.

So a lot of interest and tomorrow evening the new tenants move in.

And I'm sure they've be very happy here.

Well, that's it for now. We'll be back next time with more news

from the front line of property development.

See you then for more homes under the hammer.

-Goodbye.

-Goodbye.