How much does it cost to convert an HMO?

One thing that never fails to amaze me is the budget that some people claim they’re able to transform a single family home into an HMO for.

Even just covering the basics like fire safety requirements is an expensive process, and I’ve always taken the approach of doing things right the first time and knowing that we won’t need to worry about maintenance for many years to come.

It’s much easier, after all, to rewire a house when you’re tearing it apart than when you’ve got 5 or 6 tenants already living there that your contractors need to work around.

The other reason I like to do a lot of work up front with HMOs is that tenants in an HMO are going to put far more stress on a property than a single family.

You have 5 or 6 adults using the bathrooms, kitchens, floor coverings, doors, appliances etc on a very regular basis, and through my time as a letting agent I saw far too many landlords take shortcuts during the renovation stage, only to have extra cost and extra hassle 6 months down the line when the 8 year old kitchen (that they inherited when they bought the property and were too cheap to replace) starts falling apart.

They’d spend a few months putting little things right like loose hinges or broken handles, then it’d get a little worse as the plumbing would block and flood the kitchen or the electrics would start to flicker like Blackpool Illuminations, before finally they had to bite the bullet and replace the whole thing anyway.

The cost and the hassle are one thing that can be forgotten about with time, but from that moment on the tenants would have their landlord marked as someone who didn’t care about them or the property, and things can descend rapidly from there…

Anyway, the whole purpose of this post isn’t to criticise the choices of HMO landlords, but to focus on what I feel is a reasonable budget to expect to spend on an HMO conversion.

We’re in the process of turning an office into a 10 bedroom HMO and once that project is finished I’ll run through the specific costs of that, but having just finished turning a 3 bedroom terraced house into a 5 bedroom HMO, I wanted to use that as a real-life case study for the type of conversion a lot of us are working on on a daily basis.

What did we buy?

This specific property was purchased for an investor looking for a hands-free approach to their first HMO.  We found a great house that ticked all of our investor’s criteria:

• Low purchase price – £87,500
• Good location – close to Manchester’s tram network, media city, and the Trafford Centre
• Needed work – we much prefer houses where we can take them back to brick and start again
• Potential for 5 bedrooms – with limited effort we could create at least 5 bedrooms & 2 bathrooms

 

The property was tenanted whilst it was on the market which put off a lot of prospective buyers (read more about the purchase price here), and some serious problems with the roof meant the interior was a real mess. Unfortunately for the family who had been living here, the landlord didn’t seem to care at all about their living conditions and hadn’t touched the place for many years.

 

Pictures taken during the initial viewing

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What work was required?

As you can see from the pictures above, the house wasn’t in the best condition when we went to view it, and it wasn’t much better when the tenants left either. But we were glad to have taken possession quickly and if the cost of that was clearing a few bags of old clothes then so be it.

We had a pretty good idea of the work we were going to carry out before making an offer, but a full inspection after completion confirmed most of our thoughts.  For the sake of brevity I’ll try just to focus on the major items – what work was required, why we needed (or chose) to do it, and how much it cost.

The big ticket items I’ll run through are the electrics, central heating, joinery, roof, kitchen, bathrooms, general labour, decoration, and furniture, amongst a few other smaller items that are worth calling out.

 

Pictures taken after we completed and picked up the keys

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Strip Out/Clear Out – £1,217

Regardless of the condition of property you buy, there’s usually going to be something that needs to go. It might just be a few carpets or some old wallpaper, but in our case it was virtually everything that wasn’t screwed down, and most things that were.

We had to clear out all the old rubbish and furniture left by previous tenants, all of the floor coverings, wallpaper in every room, several stud walls to create the 5th bedroom (from what was originally a single bedroom, toilet, and separate bathroom), the entire kitchen, the bathroom, and some plaster where a damp proof course was required.

We use a team of polish contractors for this type of task, who work harder than any British builders I’ve come across and aren’t desperate to disappear at 3pm either.

The total cost here included labour for the strip out and all skip/van hire for rubbish removal through the project.

Roof Replacement – £4,055

The roof was the source of a lot of internal problems, and we found the best option was to replace the whole lot rather than risk repairing parts of it and potentially having ongoing problems for years to come.

Getting the building watertight was a major priority for us to start drying out the internal walls, so it was one of the first trades we instructed. The cost here includes replacing the entire roof (although not the timbers) as well as repointing the chimneys, renewing all the lead work, replacing the flat roof on a bay window, and replacing a small roof on an outhouse that was contributing to a damp issue in the kitchen.

Joinery – £4,540

The next step was to get the layout of the house right, and this meant a fair few stud walls needed to go up. These included creating two bathrooms (one in the front reception room downstairs – now bedroom 1, and one in the master bedroom – now bedroom 5), and creating a hallway through the original dining room (now bedroom 2).

Additionally the joinery work involved installing fire doors to each of the bedrooms and the kitchen, replacing/patching a lot of skirtings and architraves, and installing the kitchen units.

 

Electrics – £3,364

Electrics can cause such a problem when you’re electrician is trying to figure out what’s causing a circuit to trip on a system that they didn’t install. In the majority of cases unless an installation is very recent, we tend to start again with the electrics to avoid problems like these and to ensure the safety of the tenants and the house.

We completed a full rewire on this house, giving each bedroom 4 double sockets, a TV point and a single pendant light. Lights in the hallways were put on PIR sensors so they come on automatically (makes tenants’ lives easier as well as reducing energy bills), external security lights were installed at the front and back doors, a fire alarm system was installed inline with LACORS regulations, and of course we laid out the wiring in the kitchen to match our new layout.

Additionally we spent £164 of this total on a coin meter for the tumble dryer, and £200 was spent on the new TV aerials for the house.

Plumbing – £5,968

As well as the electrics, we tend to replace all of the plumbing within any HMO we’re renovating as well. The specification for the plumber is usually pretty straightforward – 1 radiator per room, 1 towel rail per bathroom, combi-boiler, and a thermostat for the central heating system, and then kitchen plumbing (sink and gas hob), and bathrooms (shower, sink and toilet).

In this house we opted for one electric shower and one fed from the boiler, and we used an Inspire thermostat for the first time (previously used Nest and Hive).

 

This video was recorded around the time the first fix joinery, electrics and plumbing were completed, to give you an idea of a renovation side mid-way through a project.

 

Windows & Back Door – £2,268

All of the windows at the back of the house were single glazed, and the back door was a bit of a relic as well, so we had no choice but to replace all of them.  There were around 6 windows in total (around £240 each), and the door cost around £800. These prices were to supply and fit.

Plastering & Damp – £3,930

We re-skimmed the entire house and had to board a lot of the ceiling as well as the old plaster was soaked from the leaking roof.  We had two areas of rising damp as well which needed to be stripped back to brick, tanked and replastered.

The plastering including materials cost £3,500 and the damp proofing cost £430.

Decoration – £3,037

As everything had been freshly plastered, everything obviously needed painting as well. Our standard approach at the moment seems to be white woodwork throughout, with light grey as the main colour and a darker grey feature wall.

This gives the rooms a bit of interest and allows us to dress them with virtually any colour of accessories, without committing to keeping the room any particular colour which a prospective tenant may take a dislike to.

In addition to these major items, there were a lot of smaller and/or less interesting items which all added up over the cost of the project:

Bathroom Materials – £1,076: two full bathroom suites including shower trays, showers, shower screens, basins, toilets and towel rails

Kitchen Units & Appliances – £2,700

Flooring – £1,986: carpets in each of the bedrooms as well as the stairs and landing, vinyl flooring in the hallway, bathrooms and kitchen

Tiles & Tiling – £1,477: this included all tiles, materials and labour for tiling the two bathrooms and the kitchen

Drainage – £1,260: adding two bathrooms to the front of a house when drains are at the back can be problematic, but these positions really helped with the rest of the layout, and I’d never consider installing sani-flow units, so the only option was to dig down and alter the drains

Moving Gas Meter – £375: this one is really important. I’d advise never having a gas meter in a bedroom. Some people argue it’s ok, but in my opinion it should be accessible at all times by emergency services, tenants and the gas board. The meter was in the original lounge (now bedroom 1) so we spent the money to move it outside the property next to the front door

Furniture – £4,199: as usual, we used Fusion Furniture Solutions (tell them we sent you and you’ll be well taken care of) to furnish this HMO. They offer a one-stop service for all furniture including supply, delivery, installation and removal of all rubbish. You’ll see from the finished pictures that it looks great as well!

 

Publicity pictures taken once the project was complete

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By the time you add in a few extras like key safes, cleaning, some miscellaneous materials, building inspectors etc., the grand total for the conversion came in at £43,890. 

This is about average for what we’re spending on full renovations, with a fairly small variance either way. This is in part because we’re focussing on very similar properties, but also because we find it’s simply what it costs to create a high quality product which will stand the test of time and be a positive investment with minimal maintenance long into the future.

If you want to download a free copy of our HMO Deal Analysis spreadsheet that we use to analyse every deal then you can get your copy here.