Episode 15 Homes Under the Hammer

Hello and welcome to the programme.

Now, the housing market is changing all the time and investing

in property can be all about finding exactly the right house

at the right time.

Yeah, that's right, Martin.

But how do you make sure you keep your finger on the pulse?

Well, why not try the auction houses?

Well, buying under the hammer can be a great way of getting

the best out of the property market.

And lots of people are looking at the auction houses around the UK.

So let's see who bagged a bargain on today's programme.

Coming up, I really hope these developers in Wales aren't

-talking about their auction experience.

-Tried it...

Tried it, didn't like it and that's it.

And in Dawley, Telford, there's no time to waste.

Six weeks from this to finish?

The minute you walk out, my people are walking in.

Though a little run down,

I find there's a lot to like about this terrace in London.

I quite like it open-plan -

it does give the feeling of a fantastic space.

All these properties have been sold at auction.

We'll find out who bought them

and what they paid when they went under the hammer.

Sold, 273.

This is Tonypandy in Mid Glamorgan, South Wales -

once an industrial coal mining town -

and I'm here today in its central shopping area.

Well, the property I'm here to see is just on the high street

and a very interesting opportunity it would appear to be on paper.

£68,000 was the guide price for two shops and three flats.

Oh, and a cellar, wow!

So, into the first of the shops, about 60 square metres,

so a good size.

Not in bad condition.

I mean, obviously a bit of shop fitting required.

Previously, I understand, a clothes shop

and that would potentially influence what it was in the future.

There is certainly a restriction which says you can't have it serving food

or drink, which is going to limit your potential renter, if you like.

It's not in bad nick and it all comes down to what you'd need to

do to turn it back into a rental machine.

But, bear in mind,

this is only the start of what was quite the expansive lot.

Yes, this was just the first of two commercial properties

that come with this lot.

So, let's pop next-door and take a look around at the second.

So, into the second shop, and similar size to the first.

In similar kind of state of repair as well.

A few signs of damp on that wall.

But in here, access, sort of, if you want to plummet,

to one of the other really exciting things about this

whole development and that is this cellar area here.

I don't know what it's like down there, have a poke about,

it looks pretty big to me.

It all comes back to - before I started work on this project,

the first thing I would want is an architect to come in here

and actually show me what I've got.

Do proper drawings, including the heights,

because you've got a big drop off at the back, access and then

start thinking about what you could potentially make of this place.

So that's two commercial properties and a cellar that

looks like it could be developed, sounds pretty good to me.

Ah, so there is. How could I forget?

There's still three residential properties up the stairs.

Time to go and take a look.

So the first of the flats, one-bedroom, bedroom there.

You've got a really nicely renovated bathroom there

and then into this room here,

which is obviously your kitchen/living room.

Views across the hills out the windows, so that's good.

It's, all-in-all, not in bad condition.

The other two flats are currently tenanted, so I can't go in there,

but the good news is they're bringing in money already.

This really is turning out to be a bit of a money-spinner.

Having income coming in from the two flats already rented is

certainly a bonus, but what I'd like to throw in is how difficult

will it be to get commercial tenants for the downstairs properties?

So we asked along a local estate agent

to give us his opinion on the area.

The likelihood of these shops being let is 50-50.

Now, on this high street, you've got established shops which stay.

You've got the ones that come and go.

I wouldn't say it's just a lick of paint,

I would say there's a bit more than that to get this ready to rent,

and I should imagine you've got a chance of renting it.

So, even with a good refurb,

the expert thinks there's a 50-50 chance it will rent.

On the other hand, he also said to us that the five properties

could rent for between £300 and £375 per calendar month.

If we take the conservative value,

that would be a monthly income of £1,500.

That would give you a yield of 26%

if you bought the property for the guide price of £68,000. Wow.

What about sales valuations?

If you were selling the complete unit

and they were done up to a decent standard, nothing amazing,

just to a decent standard, the flat and the shop,

you'd probably ask between £100-£110,000.

Well, three flats, two shops, a cellar, this is definitely

a mixed use opportunity and, I think, a potential gold mine, yes.

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

Lot number 28 is a large, commercial/residential property.

Guided at 68, start me somewhere near £65,000, somebody?

Put your hand up. Got to be at £60,000 to start me.

Shout a figure then if you want to. Make it £50,000, if you like.

£50,000.

You at 50, sir.

51. 52 now.

52. 52.

52, 53, 54...

Despite the slow start, the bids began coming in thick and fast.

We rejoin the bidding at £70,000.

70. 71. 72. 73.

74. 75. 76. 76? No.

At 75. At 75 and on my right-hand side for the first time.

At £75,000 for the second time.

At £75,000, one more if you like.

76. 77, do you want it?

77? 76 I've got.

76 and a half then, if you like.

76 and a half. 77, sir.

One more, £500 might buy it, you never know.

77. And a half back to you.

77, he shakes his head.

At £77,000 here then.

By the aisle, for the first time.

Second time.

Third and last time at £77,000.

There you go, that extra £500 was worth it.

And the successful bidders were Martin and Jackie.

Originally from Kent, this married couple have lived in Wales

for five years and have developed and sold property in the past.

However, they've been on a bit of a hiatus recently.

So I met up with them to find out what tempted them

to part with £77,000 and get back into the property game.

-Jackie, Martin, good to meet you both.

-Hi, nice to meet you.

Congratulations. Tell me why you wanted to buy this, well, opportunity?

We've been looking around in the valleys for quite a bit,

mainly at houses.

Then this one came up we decided it was quite a good

opportunity for the money and what we thought we could get it for.

We'd never really done anything with shops before,

we've done plenty of houses and things,

so we thought we'd get the most return on our money really,

that's more what it was about.

Right, is this something you do then?

Not now, we used to.

We did quite a few buying and selling

and living in the properties as we were doing it,

but then we took on a stable yard

-and that's what we've been doing since.

-A stable?

-A stable yard, yeah.

-Oh, wow.

With your own horses or just a place where you look after other people's?

Yes, it's about 35 horses there,

it's quite a big centre, and I'm going to run that

-while Martin comes and sorts this out.

-Right.

So that's sort of taken your eye off the property development

ball for a little bit?

Yeah, definitely. I suppose the market went downhill a little bit five years ago.

-It was just something else we got into, really.

-And what do you do?

I'm a trade plaster originally.

-Oh,

-OK.

-Not with horses so much.

-Can you ride?

-No.

-Oh, right, that's ironic.

Surrounded by all these horses and you can't ride.

It was more Jackie's sort of thing, horses.

-You ever thought about learning?

-Yeah, but, you know...

-Tried it...

Tried it, didn't like it and that's it.

Ponies and properties, quite a combination.

The plan is for Jackie to continue to manage their equine estate,

while Martin will take the reins of the development.

But can they turn this into a stable income?

So, an interesting opportunity here then.

Tell me what your thoughts are.

Obviously two of the flats are already let.

One of them just needs a bit of tidying up

and then we'll get that let as well.

With the shops, generally in

Tonypandy, it seems that quite a few of the shops are shut.

We will advertise them to try and get them let.

But the main thing, I think, because of the size of the shops

and there's quite a large basement as well,

I'd look at converting part of the shops into maybe more flats

and going along that sort of route if we can.

Now, the local authority might have a bit of an issue about the closing

of facilities, such as shops, in the high street especially.

Have you approached them and broached the subject?

Yeah, I looked into it.

I wouldn't close the shop completely, I would more half the floor area

of the shop and convert the back of it,

so that would be more the thing.

So the shop would still stay here, it would just be smaller.

Martin plans to half each shop

and use the rear half, along with the cellars,

to create two maisonette flats, accessible using the rear foot path.

I think it's a clever idea, giving the couple five flats

and two smaller shops.

But it doesn't really matter what I think,

it'll be down to whether local planning will allow it.

So, on a scale of nought-to-ten,

how confident are you that you'll be able to rent the shops out?

One, if I'm honest.

OK. And in their reduced size?

Much more likely because the rent would be smaller.

That's the thing, I think.

But even if it doesn't and we have to keep it as shops,

it's still a good return, we think, for what we paid for it.

We're really happy with what we got.

Any idea of a budget for what you're planning?

£2.50.

No, for the actual flats themselves, there's not a great deal to do,

it's probably a few hundred pounds really, just tidying up.

And the boiler we've got to put in, that will put the price up.

Yeah, it looks like flat three hasn't got a boiler,

so we're probably looking at another £1,000 or so

for that I should imagine for bits and pieces there.

Right, and then the conversion. Give me an idea of what you've set aside for that.

Absolutely no idea until we get plans in and that sort of thing.

There's a lot of work here to do,

so I really wouldn't have a figure off the top of my head.

It wouldn't be something we were doing this year,

it would be something for next year, really.

-OK, that's the sort of timescale?

-Yeah.

Well, listen, congratulations.

-I look forward to seeing how you get on.

-Cheers.

So this property could prove to be a very good investment with

the budget for the immediate works at £1,500,

there's lots of options for Martin and Jackie can mull over.

Will they convert the basement

and will they manage to rent out the shops?

You can find out later in the show.

I've got a quiz for you.

Who was the first man to swim the English Channel?

If you said Captain Matthew Webb, you would be right, well done.

But did you know this hero of the Victorian age was born in Dawley -

a small town just a few miles from Telford?

He was so well thought of his monument stands in the high street

with the inscription, "Nothing great is easy."

Legend suggests that a pig stood up against the wall to watch

the parade in Webb's honour that was held on his return.

It may have taken Captain Webb 22 hours to reach France, but here

in Dawley I'm just ten minutes away from Telford town centre.

Now, sadly, there's no pig on a wall to greet me,

but there is this, our property.

It's a two-bed maisonette and has a guide price £50,000 plus.

Let's take a look and get out the cold.

A quick look at the exterior tells me that it's a pretty solid

property on the outside, but will the inside be as good?

What I have noticed is there's off-street parking,

which is a great start,

but it doesn't continue into the flat at all.

This flooring is all falling off, in really bad condition

and continues here into the sort of hallway area.

This will be one of the bedrooms, which, again, the theme continues.

There is a bit of plaster and wallpaper falling off,

you'll have to change that.

And bedroom two here, which, they're both of a good size the bedrooms,

but they just need a total overhaul and freshening up.

And the bathrooms here, again, put a new bathroom in there and

it's fine but, at present, it's not looking the best.

Into the kitchen, which, surprisingly, is a good size.

It's dated, it seems to be stuck in the '70s a little bit.

But you could turn it round, just take it out,

put something new in, freshen it, modernise it and I think

you'd have a nice kitchen to work your magic when you're cooking.

I'm going to explore.

As it is, it wouldn't pass...

mustard with your Gordon Ramsays, but,

along with the rest of this flat,

it's a great size and has plenty of potential.

So into the lounge, which, again, it's a nice room, it's a nice size.

It's in keeping with the rest of the layout of the flat.

But these windows here, I thought these were double glazing,

but they're not. They're single glazed windows,

which you would have to replace to keep the heat in, keep the sound out.

Along with your floors, bathroom and kitchen,

our costs are starting to mount.

That budget is starting to get bigger,

so I would want to get this property as close to the guide price

of £50,000 plus as I possibly could,

but I do like it.

Whilst the costs are adding up, there are a couple of features

in this maisonette that I do like.

First off, there's this balcony coming off the living room, which,

weather permitting, could be a nice little sun trap.

But if you want to lay out the picnic blanket,

you also have shared access to this good-sized back garden.

Even though this property has seen better days,

I do think it's got a lot going for it.

And, like I say, if this sold for anything like the £50,000 guide price,

it could be great investment.

But will a local estate agent agree with me?

First impressions of the property,

it does need some work throughout, mostly cosmetic.

It needs completely redecorating.

One of the things I did notice, which can be missed sometimes,

is the windows are uPVC but they're not actually double glazed,

so I'd recommend those actually get replaced.

And also possibly a tarting up or possibly changing

the kitchen and the bathroom.

Demand for this sort of property for letting would be very, very strong.

There is a very, very strong rental market with a lot of outsiders

coming into Telford, as well local people.

In terms of sales, the sales side is very good,

particularly for investors, because the yields in this area

are very, very good for the actual purchase prices paid.

Sounds like a great investment then.

But let's talk numbers, rental first.

Once the works have been carried out to the property for rental purposes,

I would suggest a rental valuation of £500 per calendar month.

And what about the sales market?

If this was placed on the open market for resale purposes,

I would suggest a marketing price £80,000.

I like this place and I think the layout works,

but there's a lot of work to be done.

New windows, new floors

and I would definitely put in a new kitchen and bathroom.

This is a complete refurb.

Let's see who wasn't afraid to get their hands dirty when it went to auction.

It's a first floor apartment with two bedrooms.

It is leasehold and it is in need of modernisation.

40 to start me here.

40 in the middle, thank you.

At £40,000.

41, can I see now?

At £40,000.

41.

42.

43. 44.

45. 46.

47.

48.

49?

At £48,000, right in the middle.

At £48,000.

49 anywhere else? If not, I'm selling at £48,000

for the first time.

£48,000 for the second time.

49, new bidder.

49. 50.

51.

52, sir? 52.

53.

54? 54.

55? 55.

56.

57.

58? 58.

59. 60?

Yep, 60.

61.

62. A half.

62 and a half.

63. Another half.

63 and a half.

64. Another half?

No.

64 then. The bid is in the middle at £64,000.

Are we all done?

£64,000 once then.

£64,000 twice.

Third and final time at £64,000.

In the middle then at 64.

After a bit of a battle, the successful bid of £64,000

belonged to seasoned property developer Ray.

Regular viewers may recognise Ray, as he's appeared on the show

twice before, the last time being back in 2009.

Ray bought the property on behalf of business partner Hugo

and it will be Ray who will be overseeing the project.

-Ray, it's nice to see you.

-Thank you, Dion.

-Tell us about the auction.

The auction was quite fine, actually.

It's one of the quieter auctions we've been to in the last year.

But, yeah, a few opportunities at this auction that

I haven't seen in past auctions.

Ray actually bought two properties on auction day

and is something of a auction veteran.

It's all about preparation, it's all about the maths.

Emotion doesn't come into it. I'm not buying for myself to live in.

This actually is for an investor friend of mine,

who is cash rich but time poor.

He did come up and view this,

but I think, in the long-term, he's going to rely on me viewing

the properties.

I go to the auction and bid on his behalf,

and then he pays me for my time

and pays me for my time in renovating this property.

And what are you going to do with it, Ray?

-What's majorly needing to be done?

-Everything.

-OK.

List the everything for us, Ray.

New bathroom, new kitchen, new carpets, new cooker...

We're going to strip all the wallpaper.

It's going to need re-plastering throughout.

New front door, new interior door,

another interior door, double glazing...

so it's quite a major project.

So you've mentioned new, new, new.

Everything's got to new. Everything's got to be taken out and started again.

Skimming everything, wallpaper's coming off.

How much is that going to cost you?

Well, I've got a budget of about £12,000.

I think I'd be disappointed if I go above that.

We may well keep it well within the £12,000.

But that still works quite well within the figures,

with a 9% rental return and hopefully some capital gain as well.

And where is most of that going to go, Ray?

You've got a £12,000 budget, where is the majority going to be spent?

The kitchen and the bathroom are always the two big ones

because that's what the clients like.

And if you present them with a nice kitchen and a nice bathroom,

you're three quarters of the way there

to selling or letting your property.

-The skimming itself isn't going to be cheap.

-It's time, isn't it, Ray?

Yeah, it's probably a good £800-£1,000 to skim all the walls.

So it's a combination of things, and we're also going to put

blinds up around the windows and things like that.

-So, 12 grand.

-Yep.

-How long is it going to take you to spend that 12 grand?

About six weeks.

Six weeks from this to finish?

The minute you walk out, my people are walking in.

Is that a cue to stop the interview?

No, we've got everybody lined up.

I've got carpenters coming to give me quotes on Monday,

I've got decorators that can move in on Tuesday,

I've got a plasterer coming to give me a quote on Monday,

so we'll get on with it as quick as we can.

It may take a little bit longer, but it shouldn't do.

Sounds like Ray has it all under control

and the key to getting everything done in six weeks is organisation.

It's all organised, it's as simple as that. It's all organised.

Myself, I tend to project manage it.

My job is to make sure that they've got the money

and I go and buy the materials, source the kitchen,

that sort of thing.

And making sure that the lads have everything

they need to do a good job.

Love the confidence, love the experience.

I know you'll get it right.

-Thank you, Dion.

-Good luck.

-Cheers.

So, a regular to this show, Ray, has got a job on his hands.

He's got to skim the walls, he wants to put new flooring down,

not to mention a new kitchen

and a new bathroom, and he hasn't got a huge budget.

But, if anybody can do it, Ray can.

You can find out how he gets on later in the programme.

Still to come, this developer in London has been

planning for quite a while.

I started probably when I was 14 years old,

when I suggested some of the upgrades to my parents' house.

Whilst in Dawley, Telford,

sounds like Ray has planned it all just right.

Unusually, I've hardly lifted a paint brush or anything

on this particular project.

Welcome back to south Wales and the town of Tonypandy,

where I was getting quite excited about a very intriguing property.

£68,000 was the guide price for two shops and three flats.

Oh, and a cellar, wow!

I couldn't wait to have a look around these properties

and there was a lot to like.

Though needing work, the shops were in decent condition

and also had cellars underneath that looked a good size

and had access from the outside.

Upstairs, two of the three one-bed flats already had tenants,

which meant there would be an immediate income for the new owners.

This was looking like a good investment.

Martin and Jackie certainly thought it would be a good investment

when they bought the property for £77,000 at auction.

But, despite having tenants upstairs,

they were worried about getting tenants for the shops.

So, on a scale of nought to ten,

how confident are you that you'll be able to rent the shops out?

Oh, one, if I'm honest.

Yes, the couple will need to get their shops rented out

if they want to maximise the potential profit of this place.

But, for the moment, they had around £1,500 to update the flats

and the shops, and were looking to get started as soon as possible.

So, will there be two new shops on the high street of Tonypandy,

thanks to Martin and Jackie?

Well, six months have passed and we're back to find out.

There certainly are. They're bright, clean

and the new tenants have brought them back to life.

Upstairs, the redecoration of the flat we saw last time is the sign

that there are tenants living there,

as there are now for all three flats.

Time to catch up with Martin and Jackie to get their full story.

In the flat we're in here, there was just a little

bit of decorating to do, there wasn't an awful lot of work.

The main work was done in the top floor flat,

which was decorated throughout and carpeted as well.

The other flat across the way, that was left as it was.

There wasn't an awful lot to do with that.

With the shops, because they've been divided into two shops previously,

the electrics hadn't been,

so we needed to sort that out because you turn the lights on in one shop

and the other shop's lights come on, that sort of thing.

So that was all swapped around so it was done properly.

But what happened to Martin and Jackie's plan of possibly leaving

the shops empty and concentrating on the income from the flats?

To be quite honest, when we took it on, we were going to not worry

about renting the shops because we could see that the high-street had

a lot of empty shops, so we weren't really going to worry about that,

but then we found out about the business rates.

With the business rates, basically,

if the shop's empty you get three months exemption,

where you don't pay, and then after that you're liable for business

rates, even if the shop is empty, which we didn't realise.

Martin and Jackie decided to rent the shops out at a low rate -

just enough to cover the business rates -

which made it much more appealing for prospective tenants

and left them much better off than leaving the shops empty.

For us, financially, obviously we got an income and we didn't

have to pay the business rates, so it was a win-win for everyone really.

Business rates are like the commercial property equivalent of council tax,

only, as Martin and Jackie found out,

they are generally a lot higher and it's

the responsibility of the owner to pay them if the property is vacant.

I think Martin's decision to ask for a lower rent in order to get

tenants into the shops is a sensible one.

As he says, everyone wins.

But I think it's a good reminder that if you're buying any property,

remember to find out about all the taxes

and costs that you're liable for.

Other than the electrics, Martin's done most of the work himself,

but that does mean he's been on site every other day.

Hopefully though, that will have helped them keep to their budget.

The original budget was about £1,500.

We went over it, probably by about £600,

purely because of the electrics in the shops and things

because we didn't realise we were going to have to redo those.

But for everything else we were about where we should be.

The timescale was about six months

and I think we've managed it in six months.

There's still little bits to do.

We're getting there, we think. Fingers crossed.

Well, having spent £77,000 at auction

and £2,100 on renovating it, let's see if some local property experts

think Martin and Jackie need to keep their fingers crossed.

I think the property is not too bad.

They've done some work to it,

although the finish is a little bit basic, shall we say.

If I were the owner of these properties,

I would have done exactly the same thing - keep them separated.

You can get more money renting out two smaller shops

than you could do just renting out one concern.

Having spent a total of £79,100, what could Martin and Jackie

expect were they to put all five properties on the market again?

If you're going to sell the whole job lot as a going concern,

you would probably market this place at around £80-£85,000.

I think if you were to sell the building as an investment with

it fully let, you'd probably achieve a figure in excess of £90,000.

That would give the couple a pre-tax profit of up to £10,900,

but Martin and Jackie bought this to rent the spaces out,

so how do the figures look for renting?

Let's start with the shops and then the flats.

The rental valuation on the two properties would easily

achieve £300-£350 per calendar month on each shop.

I think the flats would rent for about £300-£350 per calendar month,

at the moment.

Those upper values would mean, if all five units were filled,

Martin and Jackie would get an income of £1,750 per calendar month,

giving them a yield of over 26%.

That's brilliant.

So, it all seems to have come good for Martin and Jackie,

but they'd previously thought about applying to convert the cellars

and the back of the shops into more residential space.

Would they still consider it?

I couldn't really see in the future there would be much point

changing it because I think, with the amount of people we've had

trying to rent the flats and the shops,

I think there's going to be a market there for quite a while.

Welcome to Forest Gate in east London.

As the name suggests, there used to be gates here to prevent

cattle from straying into Epping Forest,

which once covered the whole area.

These gates came down in 1881

and today there aren't as many trees or cattle,

but there is a busy residential area with great restaurants,

shops and transport links across the city.

So, let's see if I can see the wood for the trees for the property

that was up for auction.

Now, it's this three-bed terraced house

and it had a guide price of £230,000 plus.

I'm going to go in and have a good look around.

A little bit scruffy on the outside.

Oh, good morning!

I wasn't quite expecting that.

Now, on the inside, a bit scruffy too.

You can already see how the room would have been configured.

There would have been a wall across here to create one room,

perhaps a corridor down here.

A second reception room over this side.

Although I quite like it open-plan,

it does give the feeling of a fantastic space.

Now something else that's really interesting,

you've got a big dry cellar down there, so fabulous for storage.

And right at the back of the property,

this kitchen with this rather unusual little lean-to,

so you could extend the property out here.

Sadly, you've got no fabulous view of the garden

and I can't even get out into the garden today

because we've got no keys and this door is well and truly locked.

You've got a downstairs bathroom -

I would like to see if we could move that upstairs.

I would also like to think we could maybe have some patio doors

or a nice window at the back with the door leading outside.

So, I would try and reconfigure this space here because,

at the moment, it's not really working.

Yep, as problematic as the layout is, it wouldn't take a lot to

sort and, if you could get a little bit of extra sunlight in

with the access to the garden, well, this could be a great living space.

So upstairs here, we have three bedrooms -

one at the back. I'm wondering, "Could we put a bathroom there?"

Is it worth losing a bedroom over? Another bedroom here.

I have seen this done before, where you slot the bathroom in along here,

between these two walls, and you move the doorway along.

So it could go in there, but you've got to weigh up the costs.

Is it going to be worth it?

And right at the front of the property,

you've got your master bedroom.

It's what you'd expect really, this space.

But...hmm, very interesting wardrobes.

Behind these, I'm not sure whether you can see, let's try this side.

It's a little bit awkward because they don't go all the way back.

Look at this.

You could have quite an interesting little fireplace here.

Maybe a little feature in here.

You've got to get rid of these polystyrene tiles.

So you could tidy it up.

It's just a little bit on the small side.

So I'm yearning for that bit of extra space.

Now, don't forget, you can always go up.

Building a loft conversion can easily and quickly add living space

and it can add value to your property.

But, don't forget, it will mean you will eat into this landing

area here and you'll need to think about space for stairs,

up here, perhaps.

But the good news is the precedent has been set along the road here,

so this property can only go one way, which is up.

But, first of all, I need to go down because something is bothering me.

Excuse me.

I can just imagine it, a lovely big master bedroom in the loft space

at the top of the house, and then you could use the

smaller bedroom here as a bathroom and still have another two bedrooms.

But, before I get all carried away,

come outside and have a look at this.

Now, something that's just niggling me, I noticed it earlier.

Take a look up there.

A large deep crack above that bay window - huge.

Now, this little end of terrace has possibly moved.

Does it have signs of subsidence or is it just historical?

These are all questions for a structural engineer

and I would be making that call as soon as possible

if I were looking to purchase this house.

Well, hopefully any movement has been historical

and that crack will be a simple fix.

And with the opportunity to expand up into the attic,

extra storage down in the cellar and a back garden, well,

I think this terrace could be a winner.

But what does a local estate agent think?

I think the loft conversion is an ideal opportunity with this

property because of the way the hallway is.

I'd take it up from the hallway, directly up,

transverse the staircase into the loft.

I'd put two bedrooms up there and an en-suite bathroom.

Wow, he's thinking even bigger than me

and that there's room enough in the attic to get not one,

but two bedrooms in.

But without converting the attic,

is there money to be made in this house,

guided at £230,000?

Leaving the property as a three-bedroom

and just refurbishing it,

I'd say you're going to be looking at round about £325-£340,000

and a rental value of around about £1,500 per calendar month.

In terms of rental value with the loft conversion,

you'd be looking at somewhere in the region of £1,800-£1,900 per calendar month,

with the additional two bedrooms.

For sale value, you'd probably be looking in the region

of about £425-£430,000.

This is a house with many options.

You could either do a very simple surface spruce up.

Or, at the other end, a root and branch overhaul

with the property growing up into the loft.

It all comes down to how much you want to invest

and what sort of return you're hoping to get.

So, let's see who wanted to make the property blossom

when it went under the hammer.

Move on now to Lot 170.

Three-bedroom house in need of modernisation.

Who wants to give me start on this?

250 anywhere?

What about 230 then? I'll try and help.

230 anywhere?

230 I've got.

235 anywhere?

235.

240.

240.

245.

245.

Yes or no at 245?

245.

The bidding was slow, but it was steady and the price soon rose.

We rejoin the bidding at £270,000.

270.

271.

272.

272?

If not, at the front.

Bids £271,000.

It's against you sitting down the back on my right.

271 for the first.

272, nearly. Back in.

273.

274.

If not, 273 for the first.

273 for the second.

273 for the third and final time.

Are we all done?

Sold, 273.

And the bid of £273,000 came from Thomas.

Thomas is an IT project manager

and this is his first development project, so I met up with him

back at the property to find out what he had planned.

-Thomas, congratulations.

-Thank you.

So, why was it this one in particular that stuck out

enough for you to want to bid on it?

The space, mostly.

It has been basement, which is a great addition,

and it has opportunity to convert the loft.

Absolutely, I couldn't agree more.

So what are you going to do to this house because, currently,

it's not a bad property. It does need upgrading.

Why have you bought it?

We bought it as an investment, so we want to convert it to an HMO.

An HMO property.

So you don't see this as a good family house

that you could let with a garden in a very up-and-coming area?

Yes, it could be. But the return of investment is higher in an HMO.

Houses of Multiple Occupancy, or HMO properties, require many

more building regulations to be met

before the council will grant a licence.

While the return on HMO properties may be good,

I do wonder if fulfilling all these regulations is a lot

to take on for a first time developer.

But, to be fair to Thomas, he has already spoken to

people at the council and feels this is a good opportunity.

So, what are his plans for the conversion?

It definitely needs more bathrooms in here

and this living space can be converted into multiple rooms.

OK, so you're going to get two rooms downstairs, a kitchen at the back.

What about upstairs?

Upstairs we're going to keep the three bedrooms,

but we're going to squeeze in a bathroom.

So where are you going to squeeze in that bathroom?

There's a few possibilities.

One in the front room or the other possibility

is in-between the front and middle room.

-So, you'll keep the bathroom down here as well?

-Yes.

So you can have two bathrooms, three bedrooms and two rooms down here.

That's right, two rooms down here.

So tell me, Thomas, what are you going to do

if you don't get permission and it doesn't work out?

Do you have a plan B up your sleeve?

The other plan B, as you mentioned, is to renovate

and put it back on the market, and it will give a good yield as well.

Well, it's so good to hear that Thomas has a backup plan,

but what about that crack? Does he think it's going to be a problem?

Did you notice the big crack above the bay window at the front?

Erm...

No, I didn't and I don't see that as a big issue

because I'm going to do major redevelopment.

So you think you're going to do such extensive work that it won't matter?

Yeah, I did have an inspection from inside

to see if there is any structural damage, but I didn't see it,

so any cracks from outside will be superficial.

You know what, you'd be wise to speak to a structural engineer,

or somebody that might be able to advise you,

because it is quite a deep crack. And I know, after this little chat,

you're going to go straight out there and have a look.

-HE LAUGHS

-I'm probably going to deal with the experts about this.

Well, that's a good idea, Thomas.

There's a lot of work to be done here and, well, Thomas has

given himself a budget of £15,000

and a timescale of three-to-six months.

He's obviously keen to make a good profit once the work is done,

but how involved will he be in the renovation process?

So, tell me about the fact that you like to tinker with design.

Well, it started probably when I was small, 14 years old.

When I suggested some of the upgrades to my parents' house

and, yeah, it started from there.

It's kind of interesting to see my ideas coming to life.

And do you absolutely love everything to do with starting

a project, from the beginning right the way through to the end?

Yes, the process is what matters, not the end result.

-Just watching how it evolves.

-Yeah.

-Thomas, good luck.

I can't wait to see the outcome. I hope it all works out for you.

-Thank you.

-Thank you.

So, Thomas has got big plans for this place.

An HMO is a lot to take on as a new property developer

and I'm a little bit worried he didn't notice that large

crack above the window.

So let's hope there are no other hidden surprises that might

spring up along the way.

Join me later and you can find out how Thomas gets on.

Well, we've seen how one of the properties panned out

on today's show, but what about the others?

Yes, let's see how two of our other auction buyers

-got on with their purchases.

-I can't wait to find out.

Time to head back to Dawley in Telford now.

It was here on a chilly day that I had a look around this two-bedroom

maisonette that had an attractive guide price of £50,000 plus.

It was a well-proportioned flat with good-sized rooms

and lots of potential.

However, I did feel that money would need to be spent here.

Along with your floors, bathroom and kitchen,

your costs are starting to mount.

That budget is starting to get bigger,

so I would want to get this property as close to the guide price

of £50,000 plus as I possibly could,

but I do like it.

The bidders also liked it on auction day, with two going head-to-head

over this maisonette.

In the middle then at 64.

The successful bidder with £64,000

was seasoned property developer Ray...

who, on this occasion, had bought the property on behalf

of his business partner and investor Hugo.

Ray would be overseeing the project and he didn't plan

on wasting any time.

The minute you walk out, my people are walking in.

Yes, although there was a long list of jobs,

Ray predicted a six-week turnaround and a relatively tight

budget of £12,000 on this project

that was destined for the rental market.

Almost six weeks to the day later,

we've returned to see how this maisonette has changed.

The mustard kitchen of old has been replaced with

fresh contemporary units and slick black tiles.

From top to bottom, this maisonette has been given a fresh start...

..with new carpets, freshly painted and plastered walls

and double glazing installed throughout.

Even those shabby stairs are now looking perfect.

The maisonette is looking absolutely ideal for the rental market,

if that's still the plan.

And another change here, which I wasn't expecting, is that Ray and his

team have added another parking space at the front - very handy indeed.

The work that we've carried out,

if you start from the outside, we redid the parking area,

laid decorative stones, cleaned that out.

We put a new front door and fascia on.

Inside the property, one of the big jobs was stripping all

the wallpaper because some of it was woodchip.

We had to plaster every single surface

and we had to wait for the plaster to dry,

so that probably took up to

two and a half weeks for that process to go ahead.

From there, we've obviously decorated the whole of the property.

We've put in a new bathroom, fully tiled.

New kitchen, new carpets.

We've double glazed all the windows because they were single glazed.

And every other ad hoc job that you can think of

that would be needed to do a property up.

Ray and his team have licked this place into shape and all

within that six-week timescale,

which is really impressive considering the transformation.

However, how is his budget looking?

The original budget was £12,000.

We actually came in at £11,750, so we just made it,

but included in that was my time.

So if it was my own property, then the costs would be slightly cheaper.

The main costs, as always, are in the bathroom and the kitchen,

and obviously re-plastering the whole property wasn't particularly cheap.

My role in the project was to project manage the work.

Unusually, I've hardly lifted a paintbrush or anything on this

particular project. I've had really good workers working for me.

My job is to make sure that they've got the money, the equipment,

the tools and direction that I want them to go in,

and they followed my instructions almost to the letter,

so I'm really pleased.

Ray's partner is purely an investor

and trusts Ray to get the job done to time and within budget,

which he clearly has,

making this a successful project for both Ray and the investor.

However, before we get too carried away,

it's time to check the thoughts

and opinions of two local estate agents on this property that,

including the purchase price, has seen a total investment of £75,750.

I think the main selling point of here, I think,

is definitely the kitchen and bathroom.

If you can demonstrate that they've been done,

I think they're really good selling points.

But also, for here as well, he's got off-road parking

so that tends to be a good selling point.

Kitchens have been replaced, bathrooms have been replaced,

freshly decorated, new carpets,

all been very well done.

But, overall, done to a very good standard for this type of property.

With the agents impressed, let's hear their sales valuations first.

I'd say probably resale value for here as being £75,000.

If you were to put this on the open resale market today,

I would value this property at £79,950.

Slightly disappointed.

Not necessarily in their valuation, which I'm sure was true and honest.

I usually feel I do a better job

for my investors than just making a maximum of £5,000.

Oh, dear.

That top valuation of £79,950 would mean a modest pre-tax

profit of just £4,200.

But, with the investor set on renting,

let's hope those valuations are more positive.

For rental purposes, I would say the property is

worth in the region of £500 per calendar month.

I would anticipate a rental income of £525 per calendar month.

£525 per calendar month is what we've already got an offer for.

It's not a sealed offer yet in the sense that they're still

doing the credit checks, etc,

but that's what I would expect to get and I'm quite pleased

because that gives us 8.5%.

Again, not as much as I would normally like -

we normally try for the nine -

but I'm sure that my investor will find that perfectly acceptable.

Yes, at just under 8.5%, Ray has achieved a very healthy yield.

And with his latest project complete, Ray is looking to the future.

My long-term objective is to make sure that I've got a decent

pension pot, that I become self-sufficient on cash

and time rich, so that I can enjoy my retirement.

Time to return to east London now,

and this three bed terrace in Forest Gate.

It needed a thorough modernisation, but it was roomy and with

both a cellar and a loft, it gave any developer a host of options.

However, I had spotted a crack in one of the walls outside

and I really hoped this wasn't a sign of a bigger issue.

It was bought at auction for £273,000 by first-time developer Thomas.

He had done his research and had a plan to maximises profits.

We want to convert it to an HMO property, yeah.

So you don't see this as a good family house that you could

let in a very up-and-coming area?

Yes, it could be, but return of investment is higher in an HMO.

Taking on a House of Multiple Occupancy is a big job.

Thomas would need to construct a second bathroom upstairs and rebuild

the original walls downstairs to create an additional room.

But it's his choice and he's absolutely right -

there can be a good profit in HMO properties.

He'd given himself £15,000 and six months to complete the project.

How would the renovation rookie get on?

Well, eight months later, we're back to find out.

Well, it's looking very different.

But there's no getting away from it, it's not quite finished yet.

It looks like something hasn't quite gone to plan.

I wonder if it's anything to do with that crack

I saw above that window outside?

Well, when we started working on the property,

we found structural issues.

The floors were not straight.

The cracks in the walls also was

part of the very old house settlement, so they had to fix it.

So now the floors are level, how it should be.

Dampness was another major issue in this house.

We had to strip all the current rendering and put in a new one...

so that was the other issue.

That's exactly what I was worrying about.

But looking on the bright side, the building didn't need

underpinning, so it could have been worse.

And looking on the even brighter side, there are new windows,

new walls, a new staircase. You can even see a back garden now.

Let's have Thomas talk us through the changes.

In this floor we divided the bedroom,

the large bedroom here, into a smaller bedroom and a bathroom,

and we kept this bedroom the same size as it was before.

Even though we added the new bathroom in here,

we still have a quite sizeable bedroom,

so I'm quite pleased with that.

Yes, I'm not surprised he's pleased.

He's managed to squeeze a bathroom upstairs

and still have three good-sized bedrooms.

Downstairs, Thomas has taken out the old kitchen, split the bathroom

at the back and he'll install a separate shower room and toilet.

He's got the second bathroom downstairs that he wanted too.

So how about the rest?

Well, we built a partition in here to separate the rooms,

so this is going to be a living room

and the other one will be a guest room.

A guest room?

Hang on, I thought Thomas was planning on making this into an HMO?

Have things changed?

Our family got a new member, so we have a little daughter,

a second daughter.

This is a bigger house than ours,

so we're probably not going to let it.

We'll probably live in it ourselves.

That is wonderful news to hear

and I always thought this would make a great family home.

But Thomas was intending on doing a lot of the work himself

and with the structural issues to sort,

and a new baby to look after, he had to hire tradesmen.

So how has that affected his £15,000 budget?

We have already spent about £45,000 and probably another...

with the kitchen and everything,

we're probably going to go to probably £55,000.

Ouch, whoa.

Now that estimate is £40,000 more than his initial budget,

on top of the £273,000 paid at auction,

but it's an investment for his family now and,

by making all those changes,

he could well have added value to the property.

So we've asked along two local estate agents to see what

they think of Thomas's development

and see if there's opportunities

for further developments to the building.

Having an upstairs bathroom is always a plus in a property,

especially when the house is for a family.

If the property is rented out then, again,

a second bathroom is beneficial, so it is a plus.

Er...having seen the kitchen, I would personally extend it

and he has potential to do that as well.

And if he would be looking to sell, that is what people are after.

They like big kitchens.

As his development costs are already quite high,

Thomas has put any extra development on hold for the moment,

but he hasn't ruled it out for the future.

So let's get some valuations based on the lay out as it is now.

If this property would be let out as a three-bedroom house,

then the price would be in-between £1,350 per calendar month

and £1,450 per calendar month.

I would value this property from £1,600-£1,700 per calendar month.

It could sell at a price in-between £370,000-£390,000.

I would say that it could be worth from £375,000-£400,000.

We're still making above what we spent.

Thomas is absolutely right.

Though it's been a lot of hard work, using those upper valuations,

should Thomas want to sell, he could make a pre-tax profit of £72,000.

But, for now, this is to be Thomas' and his family's home

and he hopes to move in very soon.

Does he have any plans after that?

I'm looking for the next gem.

Once we've found it, you never know...

maybe we'll call you again.

Well, as you've just seen,

investing in property can be a steep learning curve.

And we'll be back next time with more tips and advice.

Yep, so make sure you join us then for more Homes Under The Hammer.

-Goodbye.

-Goodbye.

-See you then.