Episode 3 Homes Under the Hammer

Welcome to the show. Now, over the years,

Lucy and I have met literally thousands of people

who have decided to invest in property.

Whatever the market's doing, whatever the conditions of the economy,

people don't seem to lose their passion for it.

Sometimes it's hard to keep up with all the action.

It is, Martin, but help is at hand.

Somebody who loves property as much as we do - Mr Dion Dublin.

Yes, it's great to be here.

I have been involved in property for some years.

I've done up, I've sold, I've rented, but there are some pitfalls as well,

as we often find out on Homes Under The Hammer.

Well, before you buy property at auction,

you really need to do your homework.

And even then, sometimes you have to expect the unexpected.

So let's see who rose to the challenge on today's show.

First up in Croydon, south London, budgets are being squeezed.

-Lower than £1,000.

-500 quid!

-Probably about that, yeah.

-Seriously? Whoa!

In Donnington, Telford, another buyer is also feeling the pinch.

-Have you got a budget in mind?

-I'm completely skint at the moment.

Not a lot at the moment!

And in Derby, a substantial three-floor property boasting six bedrooms

is going to need someone with deep pockets to get it operating again.

All 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.

It's yours, well done.

Situated in the south of Greater London,

Croydon, it is claimed, gets its name from the crocus

from which saffron can be harvested for culinary and medicinal purposes.

With excellent transport links and shopping amenities,

Croydon's property market is in excellent health.

# Your love is like bad medicine

# Bad medicine is what I need

# Whoa-oh-oh... #

Well, I'm here to see what has been listed in the auction catalogue as a two-roomed flat.

Now, it had a guide price of £90,000.

Now, that's not a two-bedroom flat, no,

just a two-roomed flat so what does that actually mean?

Better keep my eyes peeled and find out. Well, it's just up here.

The flat is on the first floor at the end of this terrace

and it has 73 years left on the lease.

And this is an area that is seeing a bit of regeneration.

East Croydon station can have you to Gatwick Airport in a little over ten minutes

and to Victoria in less than 20.

All music to a developer's ears! So could two rooms be tempting?

Hmm, much smaller than I imagined inside!

So, two rooms... Well, actually I'm counting one, two, three,

but that's a bathroom. Very small indeed.

In fact, this is so tiny, you'd hardly call that a bedroom.

And just a bit of partitioning so you could get that down

and effectively open this space up.

Kitchen - not really, is it?

Very small indeed.

It's more of a sort of studio flat feel, I'd say, up here.

You've literally just got a hob, a couple of cupboards over there.

It feels like we're up in the eaves in a loft space, really.

This is where it gets rather interesting.

So I'm just going to my bedroom. Good night, everyone!

I'm going down the stairs. That's it, this is my bedroom.

But then I'm coming up the stairs to go to the loo

to go back down the stairs to get into the bathroom.

Finished all of that, back up the stairs to go back into the bedroom.

Gosh, I'm exhausted and all I've done is get up

and have a shower and go to the loo!

It's not really working for me up here.

I'm really uncertain about these floor levels. Why are they so low?

I don't really know if there's that much going for this property.

Oh, yes - a rather low guide price.

# Save your money, baby

# Save your money, baby... #

The guide price of £90,000 is very attractive,

but a prospective buyer not doing their homework

or not reading the catalogue carefully could get caught out as this flat is TINY

and it's not in pristine condition either.

Now, are there ways we can improve it? Yes, of course!

There are always ways to improve property.

First of all, take a look at that.

Now, is that just the window frame that's been put in wrong

or is there something more sinister going on? Is it structural?

I'd certainly get that looked at.

Also there's a few rather odd bits and pieces lying around here.

Now, look at this. There's an old box here with a wire going into it.

I can't figure out what that is.

Also, as I walked around here earlier,

I noticed the floorboards are just a little bit spongy

so I'd certainly get those few bits and pieces looked at.

And again, I said earlier, this room, well, what is it?

It could be a nursery, I suppose,

but I think if you took down the partition walls, you opened the space up,

you'd then have two really nice bright windows looking out onto the road.

It would just be a much better use of space.

I knew I could find the positives

and all I had to was ignore a dodgy window.

And a minuscule kitchen.

And a mystery box.

And a spongy floor and weird floor levels and...

Oh, come on, Lucy, you're getting negative again.

Well, I think it's time for a second opinion

so we've asked along a local estate agent to see what he thinks.

# It's getting better all the time... #

I think the recommendation would definitely be

to do something about the configuration of the kitchen

and the smaller bedroom and that would make the living area

and kitchen a much more pleasant space to live in.

I think this flat in another area of London may sell very well

and may actually be marketed as a two-bedroom flat,

but being in Croydon, I think people would like a little bit more space

and that's what the market really wants in this area.

More space required then. And how much is that going to cost?

The cost would probably be somewhere around the region of £20,000

to get it up to a really nice standard.

If the owner was looking to rent it,

you may consider spending slightly less.

Remember the flat had a guide price of £90,000

so would spending a further £20,000 still make it profitable?

Let's hear the numbers.

If this flat was converted to a one-bed,

it would sell for in the region of £175,000

and if it was to be rented as a one-bed,

it would rent for approximately £850 per calendar month.

Ah, there you go, it certainly didn't take me very long to look around today.

It's not the biggest flat I've seen

and it's certainly not a two-bedroom flat.

In fact, it is a very small one-bedder.

But we are talking a good potential return here

if you get it anywhere near that very low guide price.

You know, I think the numbers could stack up on this pad.

Let's see what happened when it went to auction.

Right, lot 74. Hot area of Croydon, I'd invest there.

Start 90,000, not going to go below 90. 90,000 with you. 95 anywhere?

'The bidding started slowly, but rose steadily

'until significantly higher than the £90,000 guide price.

'We rejoin the bidding at £123,000.'

123. 124 over on my left.

If not, 123, first time, second time,

third and last time if you're all done?

124. 125, yeah?

126. 127.

There's only two bids. 127. Another go?

If not, 126, first time, second time,

third and last time if you're all done?

Sold, 126.

The successful bid of £126,000 came from Michael,

a chef currently working in Guildford.

Having had some previous experience in property development,

I was keen to hear what ideas Michael had cooked up for this place.

# Stir it up... #

-Michael, congratulations.

-Thank you very much.

A nice bijoux little property here.

Now, interestingly, in the auction catalogue,

-it was described as two rooms.

-Right.

-Did you view this property before you bought it?

-No, I didn't.

-You didn't view it?

-No.

-So you saw it as two rooms.

Well, actually, you've got a bonus room then, haven't you?

Exactly that, yeah. It was a surprise when I came in.

-I didn't expect two bedrooms, to be honest.

-So why didn't you view the property?

-There was no time.

It came up, it looked quite exciting so we went along to the auction.

And of course, this road is a lovely road.

It's really quiet, it's a no-through road.

Did you do any research and look at the road at all?

I did a bit of research in the fact that I looked at what properties go for in this area,

what they can be rented for so that much I did.

As for where it was, I didn't have a clue.

-Never been to Croydon before in my life.

-Seriously?

-No.

I knew of it, but I'd never been here before.

So it was quite a brave buy for you on auction day, wasn't it?

-It was, yes. It's kind of how I live my life.

-On the edge?

-Yeah, on the edge.

So what did you think when you walked in through that door?

-Were you a bit disappointed? Were you pleased?

-Bit of both, really.

I thought it is what it is, it's a small flat,

but then there's two bedrooms so there's pluses and minuses.

No, no, no, hold on a minute. It's got two bedrooms?!

-You're calling that a bedroom?

-You can get a bed in it so it's a bedroom.

Ooh, a very small bed - a cot.

But I've been talking to local agents in the area and they say keep it as a two-bed.

Initially, I thought open it up, make it a one-bedroom. That would work more in East Croydon

-but more so here, two bedrooms would rent a lot better.

-I am very surprised at that.

-I was too.

-I am very surprised at that.

If we were in central London, I would completely agree with you, but we're not.

This is Croydon and I think that's a very, very small room.

They're both very small rooms but I think it'll rent OK.

'Ha! Well, that clang you just heard was my jaw hitting the floor.

'First, Michael bought without ever having seen Croydon,

'let alone the actual property.

'And now he's convinced marketing that tiny space as a bedroom is the way to go.

'He may not like living by the book, but in my experience,

'it's best to follow the rules at least sometimes.

'Still, he's landed on his feet with this wonderful location

'so how is he going to renovate the property to really make it appealing?'

-So are you going to update the bathroom at all?

-No.

-So, seriously, you're not even going to update the shower, the sink?

-No.

-No?!

-We'll tart it up slightly but not too much, no.

I tell you what does need a huge amount of tarting up

and it's that window in that so-called bedroom.

That's coming away from the wall.

As soon as I saw the property, I could see it's actually been shortened, the window,

so we might put the full-size window back in.

Also a couple of the floorboards in there are very, very spongy.

Yeah, a bit of underlay will sort that out, I think. A bit of underlay and thick carpet!

So you're not too worried!

I mean, the whole idea of you doing this is to get it rented out ASAP.

Yeah, we hope to have it rented out within a month or so.

So what's the big ol' hurry-up for you?

I just got engaged recently in Goa, I've got a beautiful fiance so the wedding's planned for next spring

so yeah, we need to get it on the market and get some income from it.

Cor, there's a lot to do,

but Michael wants a quick turnaround so he can start generating income

and there's certainly nothing wrong with that.

I just wonder if he thought longer term, could he get greater rewards?

Still, at least this is one rebel with a plan and besides,

he's got a wedding to pay for!

So tell me, how much money do you think you are actually going to spend here?

Initially, it was going to be in the region of £5,000,

-but now it's going to be nowhere near that.

-Oh!

I'm just going to tart it up, I'm just going to get it ready for rent

and then away we go - get some tenants in and get it rented.

So, £1,000? £2,000? Stop me.

-£3,000? £2,000?

-Go lower than £1,000!

-Go lower than £1,000?

-500 quid?

-Probably about that.

-Seriously?

-Maybe about 500 quid, yeah.

-Whoa!

-Maybe a bit of flooring, some paint.

-That's about it.

-And my next question - timescale?

Probably about three or four weeks, max.

Three or four weeks and it's going to be you and your fiance doing the work then?

Yeah, I think so. Ripping up a few carpets and doing a bit of painting

and maybe even do something about that little kitchen.

Really, YOU might do it? The chef in the house!

I might even do something about that kitchen, but who knows?

-Lovely to meet you today.

-Nice to meet you.

Michael is delighted with this little flat that he bought blind.

I'm not sure though about renting out the tiny boxroom.

Can he sway his tenants with a sparkling new kitchen?

Will Michael cook up a storm or will this flat be as dull as dishwater?

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

MUSIC: Seven Nation Army by The White Stripes

It started off as a small village,

but Donnington in Telford, Shropshire began to grow in the '30s when the MOD moved in.

In fact, the base here had the largest military stores in Europe at one time.

Today, the base is still a vital source of jobs

and business to the town.

The property I'm here to see today is a three-bed semi-detached with a guide price of £60,000+.

Now, the first thing I can see are these two huge trees in the front garden.

They'll be blocking out a lot of light going into the house,

but the worst thing for me is that flat roof.

But I'll get into that a little bit more from the back of the house.

Well, let's take a look.

# You got to accentuate the positive

# Eliminate the negative

# And latch on to the affirmative

# Don't mess with Mr In-Between... #

But maybe this house has what it takes to turn from caterpillar

to gorgeous butterfly. So let's accentuate the positive.

This house is well maintained and has a driveway. Time to look inside.

Right, the stairs are the first thing that hit you,

going up to the three bedrooms.

The kitchen as well seems to be of a decent size

with a nice big window overlooking the back garden.

This is a concern to me - downstairs bathroom.

I don't like bathrooms downstairs.

If it's possible, I'd like to lift that up the stairs,

put it up there with the bedrooms - so much more convenient.

Bathrooms upstairs or downstairs -

it can be a question of convenience vs profit.

And oof, those stairs look steep.

But let's hope there's some positives at the top of them.

Nice space - living room/lounge, double aspect windows,

a big one to the back and a smaller one to the front of the house.

Gas fire there - if it's possible,

I would replace that and take it off the wall,

see what was behind it and if you can go into the chimney breast, I would.

Put a feature in there, something a bit prettier.

You've got your radiator here. A silver radiator, that's new to me.

I'd possibly go white if you could or I'd box it in with a little bit of wood,

something a bit prettier with a nice bit of shelving.

You could put some plants there or whatever you need,

but this is a decent space.

With a bit of creative thinking and a makeover,

this house could really come to life.

And the upside of that silver radiator

is that there is central heating and you are not reliant on that gas fire.

But we know the change I really want to make here, don't we?

So the big question is can we get that bathroom upstairs?

There's a big bedroom there and another decent-sized bedroom there.

This is the third bedroom.

For me, this is perfect to bring that bathroom from downstairs up here.

Get a bath in here, get a shower in here and it would be a lovely, decent-sized bathroom.

But what I have noticed is this tree here is blocking out all the light coming into this room.

You've got to do something with that tree.

Bathroom issue solved but I did say trees could be a problem.

And I wasn't expecting them at the back as well.

OK, this is a nice big space they've got at the back of the house.

Decent-sized back garden and as I can see

that must be the tree that's blocking out the light to the back bedroom.

Now, in my experience of flat roofs,

I'm not a massive lover of them at all.

Having had them in properties myself,

they do tend to leak if you don't maintain them correctly.

They can affect your insurance premiums, so buyer beware

if you're buying a flat-roof property.

As with anything when it comes to properties,

there's always a solution.

Just make sure you account for any extra work and costs involved

before you buy, especially when it comes to flat roofs.

Believe me, I've been there.

# I-I-I-I

# Once bitten, twice shy, babe... #

We've invited along a local estate agent

to have a look at this three-bed semi.

My first impression of this property is that it has got great potential

and someone could really make a go of this one.

It's got a very good back garden.

The main bedroom is a very good size as well

and it's got driveway parking to the front.

The house has a guide price of £60,000+

so what does our expert think it would be worth on the market?

Once renovated, the property could sell for £95,000.

It would also rent for £595 per calendar month.

With regards to converting the property into a two-bed but having an upstairs bathroom,

I don't think it'd have an adverse effect on the end price.

It would actually work quite well

cos it would create a small room downstairs as well.

That's great that it wouldn't affect the selling price, but what about rental?

If the property were a two-bedroom property,

I think the rental figure might come down slightly to £550 per calendar month.

OK, the issues for me are do you keep it as a three-bedroom

or do you change it into a two-bedroom

by moving the bathroom upstairs?

You've also got the flat roof issue as well,

but let's see who was brave enough to take it on when it went under the hammer.

Three-bedroom semi-detached house in need of modernisation.

50 to start me here.

50, 50 bid. Thank you. £50,000.

At 50,000, 52 I've got to see now.

At 50,000. 52 seated. 52.

54.

56? 56, took it there. 56.

58...

'The bidding started briskly enough, but stalled at £60,000,

'bang on the guide price.'

If not, I'm selling it at 60,000 in the room then for the first time...

New bidder, 61.

62, 63, 64.

65, 66.

67, 68, 69, 70, 71.

A half?

70 and a half. 71. Shaking his head.

71, still with you, madam, at £71,000.

Another 500 anywhere else?

If not, I'm selling it at 71 for the first time...

71 for the second time.

Third and final time at £71,000...

Your lot, madam, well done.

Securing the property for £71,000 was Cheryl,

sat here with her partner Richard on the left, who she was actually bidding for.

He works in the motor trade and has a small property portfolio.

However, this is his first auction purchase

and it seems bidding on the day wasn't the only work Cheryl did.

-Richard, congratulations.

-Thank you very much.

Did you actually go to the auction yourself?

-I sent the girlfriend, Cheryl, to do...

-A recce?

A recce to start with so she found out what it was like,

what the procedure was and everything.

I was interested in a house just down the road from here,

I'd done all my costings on it and basically I was just a bit fed up

because it'd gone way, way more than I wanted.

Cheryl had already been and had a look at this house.

She said, "Are you interested?"

I just said, "Yes." I was aware of her putting a hand in the air the first time

and then it must have just been nodding of the head

cos I didn't see her body move.

'Well, I think it looks like Cheryl's forward-thinking has paid off here.

'But more importantly, what does Richard think?'

After my initial look around the property,

I'm actually quite pleased so far,

but obviously ask me that in a few months' time.

But no, it seems nice and straightforward.

And your intentions for the property itself, what do you want to change if you want to change anything?

I'm going to rent the property out.

I'm going to obviously clean it, change the carpets,

get this redecorated, just make it a nice comfortable house for somebody.

Will you do anything with the bathroom? Are you going to move it, are you going to keep it as it is?

Cos I'm going to rent the property out, I'm going to re-tile it.

I'm not sure whether I'll be able to salvage the three-piece,

-but I'm going to do my best.

-Yep.

It's all going to be nice new flooring, new tiles.

I've got to put a shower in there.

OK, so you're going to make good of what you've got downstairs,

not going to move it at all and keep your bedrooms upstairs, correct?

No, interesting idea, but no, I've no plans to do that.

'Richard is renting so is probably making the right decision.

'It might be hard to recoup the cost of moving the bathroom

'as it would have to be reflected in the rental charge.

'Sometimes you have to take your personal preferences

'out of the equation and think it through.

He's also aiming to just clean up the kitchen units,

'which is fair enough as they don't seem too dated.'

So, the trees, the one at the front does block out a lot of light.

The one at the back's really close to the house.

Are you intending doing anything with them at all?

The one at the back's definitely got to go.

It's too close to the house, it's blocking a lot of the light

as you mentioned and I think it'd please the neighbours.

One of my concerns was the flat roof.

Now, do you have any concerns about the flat roof at all?

I've got a few flat-roof properties and there's quite a few in the neighbourhood.

There's no obvious signs of any leakage on this wall,

but they seem a lot easier to fix nowadays cos the resin just comes in a sheet.

-OK.

-Andy, my builder, is pretty good

so he'll keep an eye on that for me, anyway.

'Richard's looked at the type of roof he has,

'is aware of the potential problems,

'but crucially he has spoken to the builder and insurer and is happy with the situation.

'As long as Richard's got a realistic budget,

'I don't see what could go wrong.'

And budget-wise for this property, have you got a budget in mind?

-I'm completely skint at the moment. Not a lot at the moment.

-We all are!

Hopefully I'm going to get some change out of about £2,000.

That might be ambitious but I'm going to give it a good go.

If that's what you have in mind, then you've got to try and stick to it the best you can.

-Will you go over if you have to?

-Yeah, I've got to turn it around pretty quick

so if I've got to go over, it's got to be just common sense,

-take a snap decision and do it.

-Timescales in mind?

Two weeks, a week? How long do you want to take on this?

Hopefully it's not famous last words but about six to eight weeks.

-Are you going to do any of the work yourself?

-I'll do most of it myself.

-You'll do most of the work in this house all on your own?

-Yes.

-That's brave.

-Yes, me and the lad, he doesn't know yet,

-but we're going to sort this out.

-That's your son?

-Yes.

-How old is your son?

-James is 14 now.

-And what will you get him doing?

-Will he be doing the work and you'll be the foreman?

-Pretty much, yeah.

He doesn't know it yet but he'll be helping out with the manual stuff

like doing the garden, that sort of thing.

So, Richard, good luck and I look forward to seeing how you get on.

-That's brilliant, thanks very much.

-Take care.

Richard has given himself a £2,000 budget

and eight weeks to complete all the work.

He has got his son helping him out, but will he get it all done?

You can find out later on in the programme.

Coming up - when it comes to the reasons for buying this property,

the finger is pointed at...yours truly!

Well, literally, it's all your fault!

Whilst in Donnington, Telford, after something of a close shave with a tree,

Richard has learned his lesson.

Next time, I'll get a professional.

Back to south London and the borough of Croydon

where earlier I saw a rather peculiar property

which was described as "a two-room flat".

It had a guide price of £90,000 and, to be honest,

my feelings about it...

Well, I was a little up and down.

This is where it gets rather interesting.

So I'm just going to my bedroom. Good night, everyone!

Going down the stairs. That's it, this is my bedroom!

But then I'm coming up the stairs to go to the loo

to go back down the stairs to get into the bathroom.

Finished all of that, back up the stairs to go back into the bedroom.

Gosh, I'm exhausted and I'll done is get up to have a shower and go to the loo!

Well, selling for £126,000 on auction day,

the successful bidder was chef Michael.

Not only had Michael not viewed the property before buying it,

he'd never even visited Croydon before.

And he was approaching this property

with something of a fast-food mentality rather than a slow cook.

I'm just going to get it ready for rent and then away we go,

-get some tenants in and get it rented.

-So, £1,000? £2,000? Stop me.

-£3,000?

-Go lower than £1,000! Go lower than £1,000!

-500 quid?

-Probably about that.

-Seriously? Whoa!

-About 500 quid, yeah.

Maybe a bit of flooring, some paint. That's about it.

-And my next question - timescale?

-Probably three, four weeks, max.

'Ha, well! I really felt the flat needed quite a bit of work doing to it to bring it up to scratch,

'but Michael was clearly set on a fast turnaround and a quick rental.'

Seven months later and we've returned to Croydon to see just what Michael has done.

Wowee, what a surprise!

Michael has ditched his plans for a quick turnaround

and patch-up job in favour of a complete renovation,

moving the kitchen into what was one of the two bedrooms

and creating a brilliant one-bedroom apartment,

complete with exposed brick feature wall. Fantastic!

Along with fiance Manny, Michael has transformed this property from top to bottom,

adding design and character to a once-drab property.

But why the big change of plan?

We were just going to do a quick turnaround,

but then we decided, this being the first of hopefully many,

so we decided to do a proper renovation

so literally we stripped it back to the brickwork.

We took floors out, ceilings out,

we put everything back as it should be and it was a project I wanted to be proud of

and I think I've achieved that.

So this being our flagship one for the start and the first one,

that's why we decided to go all the way and do the full renovation.

The second bedroom, it really shouldn't have had a second bedroom.

The size of the floor space in this flat just didn't lend itself

to have a second bedroom. So we decided to take that away and make it a good one-bedroom.

So that's the reason we got rid of the partition wall.

It opened up the lounge and put the kitchen in its rightful place. It all flows quite nicely now.

We had an issue in the lounge with the floor.

We took actually four floors away

before we got to the original floorboards, which was some task.

It took us two weeks to get the floors and the walls up.

But once we got down to the Victorian floorboards, we realised we needed to level them out

so what we did was we put some timber frame in

and we levelled it all out and then we got good quality carpet and some good underlay,

obviously just for sound insulation as well for the flat below

so that's the reason why we stripped it back and we levelled the floors out.

One of the reasons Michael originally planned a quick turnaround

was because of his impending nuptials.

Over to Manny to find out how they're getting along.

We had to put it on the back burner at the moment

cos we have got quite a lot going on.

I've started a new job as well and also moved in with Michael

so there's a lot going on,

plus we're trying to get this off the floor as well

so we're hoping to do it next year.

'So with the wedding on hold just for now

'and the couple concentrating on property development,

'how's it been working together?'

It's been OK.

We've had a few decisions where we had to make decisions on what we wanted to do within the flat.

We've kind of come to the same decisions with the colouring,

the shading, the appliances, the curtains, the flooring

and everything else but we've been fine.

We're getting on well, yep, and hope to do a few more after this.

'Originally, Michael was planning a budget of £500

'and a timescale of just three to four weeks.

'However, the change of plan has meant that budget going up

'to around £15,000.

'And with Michael doing as much of the work he could himself,

'it's taken six months to get to this point.'

So with a total investment here of £141,000

and Michael eager to rent the property,

it'll be interesting to hear if two local estate agents

think Michael's change of plan was a good idea.

There were previously two bedrooms

and I think the owner's decision to make it into a one-bedroom flat

is definitely the right thing to do.

Because of the square metreage of the flat,

it's not that big and a one-bedroom definitely suits the size.

Well, it's an excellent finish.

The owner's done a really good job on it,

a nice contemporary feel to it.

Spacious, lots of light flooding in and a good location.

With the agents sounding positive, let's get to those valuations.

Sales first.

This flat would sell for approximately £165,000.

We would put this property on the market for £170,000.

I was looking for in the region of 160 so yeah, very happy.

Yeah, excellent. The work's paid off!

If it sold for the higher valuation of £170,000,

it would mean a pre-tax profit of £29,000. Very nice!

But for now, it's all about rentals.

We would market this property at £850 per calendar month.

This flat would rent for approximately £875 per calendar month.

I'm very happy with the rental values. I was looking for between £800 and £900 anyway

so that's bang on the money so yeah, very happy with that.

Same here, I was looking at the same as well

so quite happy for a one-bedroom.

The higher rental of £875 per calendar month would bring in a yield of around 7.5%,

which, along with the very healthy sales valuation,

makes the change of plan here a clear success.

So now it's all done, what about those wedding plans?

Probably next year.

Probably spring next year now, I think, would be a good time.

Yeah, somewhere exotic, I think.

Derby is the UK's most central city.

# Clowns to the left of me Jokers to the right

# Here I am Stuck in the middle with you... #

And it's being stuck in the middle

that's made it so successful in the past.

Of course, like all cities, it has had its ups and downs.

However, with up to a £2 billion regeneration masterplan unveiled in 2005,

it sounds like a place for the canny investor.

Well, one area of the property market that can potentially be extremely lucrative

is the world of HMOs - houses of multiple occupation.

And the property that's up for auction, this one here,

certainly has all the makings of an extremely interesting one of those.

Really close to the centre of Derby, £138,000 was the guide price,

over three floors, it's already got a licence. Let's have a look.

So pretty good nick on the outside or so it would appear.

What's it like inside? Well, a little entrance vestibule here,

that's good to have to keep the cold out.

And then into the main corridor, a few nice little grand features.

Some of the plasterwork, that's nice to see, as is the radiator

so you've got central heating which is good news.

So let's wend our way around and find out what we have.

Starting here, aha!

A decent-sized bedroom, looks to be in half-decent condition.

That's some kind of little room there. Hoowee!

Judging by the smell and the extractor, I don't know,

some kind of smoking room, perhaps.

Some houses used to smell like that all the way through.

But, yeah, I wonder if that could potentially be another room

because of course when it comes to HMOs,

it's about maximising the amount of rooms you've got

as long as you've got the correct licences etc in place.

But this is a nice thing to have.

Often sacrificed in these kind of properties, a big communal area.

But this is lovely to see.

A bit of a downstairs loo there, that's also good news.

And then passing through the property... It's massive, isn't it?

Absolutely huge.

A really good-sized kitchen.

Now, when it comes to houses that have more which have got more than one person living in them

or groups of people with HMOs, you do need to think about things like cooking facilities,

refrigeration facilities,

there's things set down in law in terms of what you have to provide

and the good news here is a really good-sized kitchen with lots of space

for, say, an extra cooker and the right number of fridges etc.

And off this room, the kitchen here, another room.

Again, crying out, I think, to be a bedroom.

At the moment, it's probably a dining room, another communal space.

Nice to have, but if you're talking about maximising your investment return,

another bedroom would be good.

All in all though, a fantastic start!

And it gets better. On the first floor, there are four rental rooms.

All pretty good sizes.

Ignore the clutter, that'll be going.

Towards the back of the property, there's a bathroom

and a separate toilet and a shower room.

On the second floor, there is a single room with a very handy en-suite.

So in total, there are six rooms currently set up for rental. Not bad at all!

And then I think you could get another two rooms.

The smoking room has to go

and I reckon that dining room could add another.

Now, I did say HMOs are lucrative,

but before we get carried away, it's not a licence to print money.

If you rent this out to six tenants,

you are basically opening up a few issues.

Number one is the rules and regulations

in terms of what you need to do to make the property habitable

for those six people go up quite exponentially.

You need things like, and it's all written down in law, you need the right number of fire escapes,

you need doors that close automatically, you need proper fire alarms,

you need the right number of this, that and everything else.

So that's going to add to your cost setting this up.

There are also licences you have to obtain.

And when it comes to actually having the place operational,

you have to get that many tenants in

and people have a propensity to come and go a bit more regularly.

So the turnaround in your tenants can actually be quite high

so you really need to be either close by, on site,

really managing the property or else get a really good managing agent

who can look after it for you. Pros and cons.

On balance, depends why you're in it.

With this place, you will no doubt have noticed there are already lots of fire safety measures,

as required by HMO regulations, and it looks well maintained.

But to renew a licence,

you'd have to ensure documentation on all aspects of the property is compliant.

An agent from the auction house who sold it came along

to tell me what he thinks any purchaser could do with this HMO,

guided at £138,000.

I think the options for anyone buying this property

are they either maximise what they have here already

or they could alternatively convert it into flats.

With regard to turning it into flats,

I don't think it's something that would be financially viable.

I think the cost would certainly outweigh the return.

I agree with that.

So what does the agent reckon it could make in rental income?

If the property were offered to the rental market

with the current number of rooms, with six lettable rooms,

then I believe it would generate in the region of £27,000 per annum.

That's not as incredible as you might think,

but that's because it attracted higher rates due to it being a place for assisted living.

However, if you just charge the local going rate of around £80 per week,

that would still mean £23,000 per annum.

But remember what I said earlier -

part of that income will need to be spent maintaining the property to the standard required by law.

Well, if you were looking for things in an ideal investment property,

this one has them by the bucketload. Yeah, a really great one to go for.

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

We've got a large detached house.

It's an excellent residential investment opportunity.

Start me at 130 then if you will.

130,000 for it.

130. Thank you, 130,000.

At £130,000... 131. 131.

132 is bid. 132.

133? 133.

133. 134. 135.

'The bids came thick and fast. We rejoin the bidding at £175,000.'

175. 176. 177.

178. 179.

£180,000.

181. 181,500?

181. 181,000.

At £181,000...

Once... Twice... Third time...

Sold at 181, thank you very much.

'The successful bidder with £181,000 was Mahesh.

'IT project manager Mahesh already has a few properties in his hometown of London,

'but this is his first venture into the Derby market.

'With him is his friend, Meyur, who already has properties in Derby

'and will be lending a helping hand.'

Mahesh, Meyur, great to see you both.

-Great to see you.

-Congratulations!

Big house, tell me why you wanted to buy it.

It's a lovely, lovely property, a detached property

and it currently has an HMO licence which we need to renew.

But hopefully we'll get everything sorted

and the idea is to bring in lots of individuals living in this house

and make some profit.

Great! You say this is your first venture into Derby.

Where have you been investing, if that's what you've been doing so far?

So my friend, Meyur, can tell you a little bit more about himself.

He's quite an influence on me regarding this property so, Meyur, you can...

OK, well, literally it's all your fault. I've been watching your programme and seeing you every day

and I started buying first in London, Plumstead and Thamesmead area,

and then a six-flat property in Nottingham

and then I've always been buying, renovating and selling in the Northeast as well.

And then this one came along

and I told Mahesh, "You need to go for this one."

So the idea is that first of all we're going to do the HMO licensing,

renew that and then once we have that,

then we'll start with six tenants to start off with,

then increase that to eight and then the future plan

-is to possibly redevelop the whole house altogether into a number of flats.

-Oh, wow!

So that's kind of the long-term plan,

but the short-to-medium-term is just to rent it out as it is.

And what about the kitchen and the various bathrooms?

We're going to keep the bathrooms as they are

-and keep the rooms as they are. There's no other major changes.

-And the kitchen?

The kitchen, we're just going to put a new cooker in there

-and a new cooker, the white goods and that's about it.

-OK.

So you wouldn't lose this communal area that we're in at the moment?

No, I think a communal area is important

and also it has external access from here

as well as from this other room here, from the kitchen as well,

-so I think we're just going to keep that as it is.

-OK.

So what's the timescale for getting it sorted out?

-Something like six weeks.

-OK.

Yeah, six weeks and the total cost we reckon is going to be around £5,000-£6,000

and we'll have it done.

'Well, keeping costs down will mean a bigger yield,

'especially if they do convert two rooms downstairs into rentable bedrooms.

'But HMOs do need to be closely managed

'so Mahesh living in London isn't ideal.'

Obviously one of the issues is going to be managing the property. How are you going to do that?

So far, what we have done is contacted local agents, that's one thing.

We also have some family friends here who can actually support

and also advise and the idea that is we will be coming round here every now and then ourselves

just to make sure that everything is in order

and just keeping an eye on this just to make sure

-that everybody behaves the way they should be.

-Well, listen, congratulations.

-Thank you very much.

-Good luck with it.

-Thank you.

-And we'll look forward to seeing how you get on.

-Thank you.

-Cheers.

Well, I definitely think Meyur gave his friend Mahesh

a really good tip-off with this place.

Even as it stands, it could make a very considerable rental yield.

And with the upgrade of those two extra rooms, even more so.

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

Well, we've seen how one property turned out.

-Let's see how the other two got on.

-Shall we have a look?

-Let's do it.

We're back in Donnington, Telford to see this three-bed semi.

For a guide price of £60,000+, it was a good, solid house.

Though along with a thorough modernisation,

I thought there was something that could be changed outside

that would mean the world of difference inside.

This tree here is blocking out all the light coming into this room.

You could trim it back, you could take it down,

but you've got to do something with that tree.

# And let the sunshine in

# Come over right away

# Send those clouds away

# And let the sunshine in... #

The house sold for £71,000 at auction

and I met up with new owner Richard to hear how the auction had gone.

It turned out Richard's girlfriend Cheryl had a big part to play.

Cheryl had already been and had a look at this house.

She said, "Are you interested?" I just said, "Yes."

I was aware of her putting her hand in the air the first time

and then it must have just been nodding of the head cos I didn't see her body move.

# How do you do what you do to me?

# I wish I knew

# Wish I knew how you do it to me but I haven't a clue... #

Yes, Richard was now the proud owner of a three-bedroom semi that he planned to let.

But with a budget of only £2,000,

he'd have to make the most of every penny.

Two months later and we've returned to find out how he's got on.

MUSIC: Wake Up by Arcade Fire

It's been quite a good experience. A lot of hard work's gone into it.

Basically upstairs and the bedrooms,

we took the old dated wallpaper out

that was slightly hanging off the wall anyway,

re-painted, a little bit of papering.

The whole house has been re-carpeted

but the big problem upstairs was nicotine, absolutely everywhere.

I've never encountered it before.

It took ages to get that all clean so it's like two or three coats on the ceilings,

that type of thing and basically the whole house has just been cleaned.

In the kitchen, to help avoid overspending,

Richard has kept the old units.

However, he's re-grouted everything, put up new wallpaper

and painted and cleaned throughout.

And I think it goes to show what you can achieve even on a limited budget.

On to the bathroom and it's a similar story.

Richard managed to use the bathroom suite,

refreshing it by replacing the floor and paintwork and re-tiling it.

He was keen to keep the bathroom downstairs so that for rental,

the flat stays as a three-bedroom.

But he did listen to my suggestion for the lounge.

This is the front room. I finished it all in a nice neutral magnolia.

As you can see, we took Dion's advice and got rid of the fireplace.

It looks nice, it's safer, it's cleaner.

The silver radiator has disappeared,

I think much to everybody's pleasure on that one

and I managed to salvage the floor

and all in all, I think the room looks great.

I think that looks pretty good, if I do say so myself.

And you might have spotted earlier

that a rather large feature has disappeared.

Yes, Richard tackled this himself.

Don't try this at home, folks!

I must have the best neighbour in the world next door with Malcolm.

The good advice of my friend Ian,

he gave me the advice on how to do the angles in cutting the tree down,

I got it slightly wrong

and basically instead of going that way, it went that way.

And that explains the new fence.

Perhaps the DIY approach didn't save much as the fence had to be replaced.

I really would recommend getting a tree surgeon in to tackle a job like this.

It can be dangerous to life and limb,

not to mention relations with neighbours.

And of course, once you've chopped that tree down,

there's a lot of wood to get rid of.

I must thank my son James who spent many an hour chopping up the branches

and helping me dispose of everything.

I was very popular with a lot of people who've got wood burners,

I think I've kept them going through most of the winter with the logs.

# Oh, yeah, the trees

# Those useless trees

# Produce the air that I am breathing... #

You'll not be surprised to hear that the trees in the front garden remain.

Richard took on this job intending to keep a very tight budget as he said he was skint.

How did that go?

I said £2,000 and I'm really chuffed, I think it came out at £1,958.

Whether that's coincidence or not, I don't know,

but really pleased so it's absolutely come on spot on.

Richard bought the property for £71,000,

£11,000 above the guide price.

But I think sticking to that £2,000 budget is pretty good going.

We've asked along two local property experts to see what they think.

The layout of the property is very typical to the area.

There's not really much more you could do to the property

because if we were to move the bathroom upstairs,

we would lose a bedroom which would affect the saleability

and we'd be losing that further bedroom.

It's got a driveway, which would be extremely appealing

both for the resale and the letting market.

I'm glad to see the new owners have kept the bathroom

on the downstairs ground floor level

because it will mean that you will get a greater rental income

if the owner does decide to let the property out.

It certainly sounds like Richard made a good decision leaving that bathroom where it was.

But if he sold the property,

would he be able to make back his £73,000 investment?

If the owner was to put this property on the market,

I believe it would achieve anything in the region of £90,000-£95,000.

I would recommend an asking price of £95,000.

The higher valuation of £95,000 could mean a pre-tax profit of £22,000,

minus the usual taxes and expenses.

But of course, it's the rental valuation that Richard's really interested in.

The rental figure for this style of property would be £550-£575 per calendar month.

I would suggest a rental income of £550 per calendar month.

That's absolutely spot on.

£550 was what I was going to ask for so that's great.

If Richard was to get his desired rent of £550 per calendar month,

that would give him a yield of just over 9%. A good result!

So, has he learned anything from his experience?

I really appreciate good friends.

I'd maybe give myself a little bit more time,

but having said that, it got the work done

and try and avoid cutting trees down.

Next time, I'll get a professional.

And now back to the centre of the UK - Derby -

and this substantial detached property.

On at a guide price of £138,000, this was previously used

as a house of multiple occupancy, or an HMO to you and me.

It was in pretty good condition with six lettable rooms

already in place and the potential for another two.

It proved to be a popular lot on auction day

with two bidders battling it out.

Once... Twice... Third time...

Sold at 181, thank you very much.

'The successful bidder in the end with a bid of £181,000 was London-based Mahesh.

'IT project manager Mahesh already had a few properties in London,

'but this was his first venture into the Derby property market

'and he brought with him experienced property renovator and friend Meyur.'

-Mahesh, Meyur, great to see you both.

-Great to see you.

-Congratulations!

Big house, tell me why you wanted to buy it.

It's a lovely, lovely property, a detached property

and it currently has an HMO licence which we need to renew,

but hopefully we'll get everything sorted

and the idea is to bring in lots of individuals living in this house

and make some profit.

With Meyur providing help and advice along the way,

Mahesh had plans to create two extra bedrooms to maximise rental potential.

However, adhering to the rules and regulations of HMOs is no simple task for a landlord

so I was interested to see how plans would progress.

One month later and we've returned to see how they've got on.

Where there was once a stinky communal smoking room,

there is now a newly decorated extra bedroom.

I'm glad to see the living area at the back of the property

is still here and freshly decorated also.

Plus they've managed to create an eighth bedroom from the old dining area.

Throughout, the property has been tastefully and neutrally decorated,

making it perfect for the HMO market.

The attic room is certainly looking much improved

and the whole house looks refreshed and ready to rent.

But how's it been for Mahesh and Meyur?

OK, so we re-painted the whole house. We also re-carpeted.

We have done some upgrades to the kitchen,

the kitchen area where we needed to move a sink so we introduced another sink

so there are two sinks in the kitchen now.

But as far as the house is concerned,

we've actually done lots of roofing work.

There's a new roof in the front as well as at the back,

but unfortunately that roof work is not up to standard

so we are still working on that.

Apart from that, just a general clean-up of the house,

just lots of little debris everywhere,

but, yes, that was the main part of the work.

So unfortunately the roof work will have to be redone,

but aside from that, the house is looking almost ready for rental.

What exactly are their plans?

There are eight lettable rooms

so the idea is that there would be eight individuals living there.

So depending on the HMO licensing we're going to have,

some of the rooms may be occupied by a couple rather than individuals

so that's kind of our aim.

Having said that, we've had inquiries from students as well

and they're interested in taking the building

and we can have students coming in every year.

With students, you tend to get a little bit more money

than you do with renting out to non-students.

To get to this point, it's cost Mahesh £8,000 of his £15,000 budget

with a further £3,000 estimated to finish the property off.

However, before he can rent the property,

he will need to get that all-important HMO licence renewed.

Well, only this afternoon, we are getting yet another inspection.

This could be a final inspection when the inspector comes in.

But if they do find that there are certain things that are not up to standard,

then chances are that that will take another week from today.

But we are nearly there.

Well, it's taken around five weeks and once completed,

the estimated total cost will be £192,000.

With Mahesh eager to start filling the house with tenants,

it'll be interesting to hear the opinions of two local estate agents.

They've done what they've needed to do initially,

they've put new carpets in and painted it throughout.

There's some roof work that needs to be carried out,

but I'm sure they've got that in hand.

To achieve two more letting rooms really was common sense.

They were there, one was a smoking room,

one was a communal dining room.

I don't think you need either for that purpose, really,

so to transfer them into private letting rooms was an obvious solution.

Well, what is the rental potential here?

Yeah, with a property like this, it's divided into rooms

and it depends on what size the room is,

but you'd be looking between £250 and £300 per calendar month

and that would include all of the bills.

In terms of rental, if it's appealing to the student market,

students will pay £95-£100 a week for a fully serviced house

but they're prepared to pay that because all the bills are included,

they simply pay the landlord and that's it, job done, they are there.

We have had students who are willing to pay £100 a week for seven of the rooms

and they want the eighth room as a study room and so we do agree with these figures.

'Well, if they did achieve each room being rented for £100 per week

'and assuming the rooms are rented out all year round,

'that could mean a huge rental yield of around 20%.

'So with Mahesh's first foray into the Derby property market a clear success,

'how have they enjoyed working together?'

It's been fun. It really has been fun.

Working together,

learning from each other, picking each other's brains

and at the same time, the whole project, how to turn it from what it was to what it is.

It has been a challenge, but it's been an enjoyable challenge.

Well, that's it for today's show.

Join us next time for more action from the auctions.

We'll be looking around bungalows to top-floor flats.

-And anything in-between.

-See you then.

-Goodbye.

-Goodbye.

-Goodbye.