An investment case study from property investor Tex Jones
by Julie Whitmore, YPN writer and property investor.
Finding property investment deals where you can add value whilst leaving minimal money in the deal is not always easy in any area, let alone in London! In an article in the September 2021 issue, however, property investor Tex Jones shares how his latest project will achieve a no-money-left-in investment from the first 12 months from rental income, in addition to adding £94,344 uplift to the property post-refurbishment.
Growing up observing his parents build a steady property portfolio, Tex not surprisingly developed an interest in and appetite for property from an early age. In the article, he shares how a weird experience when trying to find a room in a house in multiple occupancy (HMO) as a student, inspired him to launch a rent-to-rent business with a mission to create desirable accommodation.
Whilst studying at university, Tex started to attend the property investor network (pin) meetings in Canary Wharf, which opened up his awareness of the different property investment strategies available. He went on to set up his rent-to-rent business by putting in place all the infrastructure and governance required before starting to approach estate agents. On leaving university he went on to work for a property developer, which helped him to understand about private rental schemes, the planning process and adding value with planning gains. He left his role in 2017 to focus solely on his own property interests, and on the acquisition of assets to develop, refinance and hold through Jones Real Estate.
Tex describes how he identified and purchased the case study property through an estate agent. He saw the value as a potential six-bed HMO but also knew that it would work on a straight flip as a four-bed house – he could still make a profit on that, so had an alternative exit strategy in place. The purchase was agreed just before lockdown but because of Covid-19 he went back to the estate agent to renegotiate the deal due to the uncertainty within the market at that time.
An HMO planning application process that became a nail-biting experience
As the property was in an Article 4 area he needed to apply for planning permission, which was a nail-biting experience! Originally the council received seven objections to the application (if eight objections are received the application is required to go to committee) … but as they were about to approve it, the council realised they had missed an address when the notification of the planning was issued so were required to resend the notifications. On receiving an additional objection on the second round of notifications, it then needed to go to committee. So, after eight weeks plus an additional 21 days for the additional notification process, he then had to wait for the planning committee to meet – which doesn’t happen during the summer. It was September before this took place.
Investors don’t realise just how much of a relationship business property is!
Tex presented his case and was successful in gaining the approval as he overcome all the objections raised, ie oversupply of HMOs in the area (although there were no density figures in place), bike storage provision, size of one of the rooms (although it conformed to size requirements) and concerns over an off-suite room (it’s not illegal to have shared bathroom facilities in an HMO). As Tex had ten other properties in the area through his rental business, he was known to the licensing and planning department and had developed an understanding of what they were looking for in terms of standards and requirements. He had been conscious about and actively building relationships with the right people, including the planning department.
It was October before Tex was able to get back onto site to start the works and then had to navigate the challenges with delays in materials. It took almost 12 months to complete.
Creating a brand with a quality feel
The concept of the design is about supporting co-working and the finish is done to a high standard. Tex is building a brand with a high-quality feel called Private Members Living, which has the feel of a private member club with corresponding quality of finish and additional services provided such as:
- keyless entry
- high quality furnishing and appliances
- virtual concierge for parcel deliveries
- Tenant discounts via a third-part provider
Tex is keen to provide the quality which can be found in large co-living schemes, however recognises that not every tenant wants to live in a 250 person HMO.
On refinancing this building, Tex achieved an 80% LTV and had £25,656.12 left in the deal, which he will receive back in net rental in just over 12 months. This was in addition to adding £94,344 uplift to the value of the property, which will continue to provide net monthly cashflow of £2,039.
This just goes to demonstrate that there are definitely deals to be found where value can be added, even in high value areas!
To read the full article and the details of the case study, subscribe to YPN magazine.