Lee & Ceri Chaloner Property Investors Passive Property

369: From accidental HMOs to career replacing income, with Lee Chaloner

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Today’s guest is Lee Chaloner, one half of Passive Property if you’re on the Instagrams. Along with his wife Ceri, they’ve been building a portfolio since 2019 in and around Wrexham in North Wales.  

I’ve got a lot of admiration for these guys – they’ve taken a long term view to building their property income, and only recently started to think about scaling back their day jobs as their business gets to a point where it can sustain them and still allow them to grow. 

They started off flipping a house to raise additional capital, before directing most of their attention to HMOs, with direct to vendor deals and buying existing but run down HMOs where they could see an opportunity to add value; and they’ve recently added serviced accommodation to the mix. As Lee points out during the interview, their focus isn’t on one strategy or another, but instead on high cash flowing deals within easy reach of their home. 

What we discussed in today’s episode:

  • Lee Chaloner is a property investor based in Wrexham, North Wales. He invests with his soon-to-be wife Ceri (congratulations on the engagement 🥳) whilst working full time, and raising their family (a dog called Jeff, and their son).
Jeff, the Boston Terrier

  • Prior to investing, Lee was in the army (and prior to that, he lived all over the world whilst growing up with his stepdad who was also in the army), and more recently has been working for Kellogg’s. Ceri has her own business as a beautician which she continues to run from home as well.

  • Lee has always had an entrepreneurial urge, but didn’t start investing seriously until 2019. At that stage he owned his own home and rented out two of the bedrooms, creating his first ‘unofficial HMO’ (a very similar story to our own), but as a bit of a bachelor pad, when him and Ceri decided to move in together they realised they needed somewhere new, so they first moved into her mum’s house in order to save a deposit and some cash for renovations.

  • Following a project on their own home, discovering Rich Dad, Poor Dad and inspiration from a cousin who had started investing a year earlier, they were ready to start their property business properly. They wanted to focus on HMOs, and refinanced some equity from their own home, but realised they still didn’t have enough to create the standard of house they wanted, so decided to do a flip to increase their cash.

  • A property they found had been on the market for a year, originally listed at £120,000, but after some negotiations they secured it for £90,000. Conveyancing took 3 months, the renovations took 3 months (and about £18,000) and they sold it for £135,000 giving them a £22,000 boost to their investment pot.

  • Their first HMO followed soon after – an existing 5 bedroom HMO in Wrexham that they bought and turned into a 4 bedroom… yup, that stumped me initially as well!

  • So they bought an existing HMO to avoid needing to apply for planning, and converted it from 5 bedrooms and one bathroom into 4 bedrooms and 3 bathrooms. Whilst this sounds like it might have a negative impact on the income of the property, they effectively doubled the rental income per room due to the improved standards in the house. And we all know that 4 rooms where the rent has been doubled will generate a higher income than 5 rooms at the original rents.

  • That approach has stuck with them since – buying rundown, existing HMOs around Wrexham with scope to add value and increase the income, even buying another house from the same landlord as the first. There are lots of ways to acquire an HMO portfolio, but a lot of people overlook this simple option of sourcing from existing landlords who are looking to sell.

  • Their 2nd HMO was a step up in size to a 6 bedroom, 5 bathroom house. They purchased it for £145,000, spent £50,000 on the renovations, and it is now valued at £260,000, with monthly rental income of £3,140.
Kitchen in Lee and Ceri Chaloner's HMO
Setting the standard for HMOs in Wrexham
  • Despite investing in property to create more freedom for themselves, Lee & Ceri Chaloner have realised that so far, they’re busier than they’ve ever been. To counter that, Ceri is reducing her working hours and Lee is planning to go part time at his job next year. They’re conscious that in order to grow their portfolio, they need money to reinvest and they need an income to be mortgageable, so it’ll be a gradual transition rather than an overnight jump into ‘full time’ property investing.

  • In addition to the HMOs, they’ve also moved into the Serviced Accommodation market now as well, in part to diversify their income and in part due to a lack of suitable HMOs available to buy in their area. This has brought its own challenges as they continue to self-manage, roping in help from their parents for cleaning, housekeeping etc whilst they familiarise themselves with what it takes to offer a level of service they’re happy with, before ultimately outsourcing some of these tasks to free up more of their time for higher value work.
Proud owners Lee & Ceri in front of their first SA in Llangollen – www.bridgehideaway.co.uk

  • Their latest purchase was a badly advertised property that looked like a single terraced house, but it was actually the whole building that was for sale. It’s configured as 2 x 1 bedroom apartments at the moment, but they will be converting them both into 2 x 2 bedroom apartments and splitting the freehold into two leasehold properties in order to try and maximise the end value.

  • Despite all the progress, they’ve had some challenges along the way, including in 2020 when Lee was struggling with TSW. During this time he was more or less housebound and Ceri became a real rock – looking after Lee, their new born baby, and the Passive Property business. A tough time for them, but one that’s obviously made them stronger!

  • We finished up the conversation with Lee’s advice for other investors – don’t rush! All in, a great discussion with one half of the Passive Property team. Check them out on Instagram at passive.property or via their website.

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