One of the key lessons we emphasize in our Supported Living Strategy Course is the importance of having multiple exit strategies. After completing the training, James and Sarah Collins, owners of property investment company Collins Property Group, put this into action by listing their underperforming HMO on our property portal.
The Challenge: An HMO That Wasn’t Delivering
James and Sarah purchased a three-bedroom house in Nottingham with the goal of maximizing rental income by converting it into a five-bed HMO. To achieve this, they:
- Converted the kitchen and lounge into bedrooms
- Transformed the dining room into a new kitchen
- Removed the shared family bathroom and added en-suite bathrooms in each bedroom
- Fully renovated the property to a high standard
At first glance, this seemed like a great investment. They expected strong returns once fully tenanted, but unfortunately, reality didn’t match expectations. Instead of making the anticipated £753 per month profit, the property was actually losing £168 per month.
The Financial Breakdown:
Expense Category | Amount (£) |
|---|---|
Purchase Price | 72,000 |
Refurb, Fees & Finance | 50,000 |
GDV (Gross Development Value) | 160,000 |
Mortgage | 120,000 |
Projected HMO Rent (Fully Occupied) | 2,166 |
Mortgage Payment | 495 |
Bills, Insurance, Maintenance & Management | 918 |
Net Profit (If Fully Occupied) | 753 |
Actual Income (2020) | -168 (Loss) |
This is a common issue with HMOs. While the rental income looks appealing, high operating costs and void periods can quickly eat into profits. Additionally, managing an HMO can be time-consuming, requiring ongoing tenant management, maintenance, and marketing.
The Shift to Supported Living
Recognizing the challenges, James and Sarah explored alternative strategies. They were interested in supported living, but struggled to connect with local providers—until they discovered Supported Living Gateway on social media.
By listing their property on the portal, they quickly found a care provider interested in leasing it. The provider specializes in supporting individuals with learning disabilities and autism, which resonated with James and Sarah personally, as both have family members with similar support needs.
The New Financial Model: Supported Living Lease
To facilitate the transition, they refinanced the property, securing a new valuation and mortgage. Here’s how the numbers now look:
Expense Category | Amount (£) |
|---|---|
New Property Valuation (Refinanced for Supported Living) | 195,000 |
New Mortgage | 136,500 |
Rent from Care Provider | 1,365 |
Mortgage Payment (6.5%) | 739 |
Insurance | 100 |
Net Profit (After Costs) | 526 |
A Hands-Free, Higher-Yielding Investment
James and Sarah signed a five-year lease with the care provider, meaning:
✅ No bills to cover
✅ No tenant voids
✅ No management responsibilities
✅ More stable, long-term income
Despite the lower rental income, the switch to supported living resulted in higher net profits, even with increased financing costs. More importantly, James and Sarah now have a hands-free investment while also contributing to a social cause they care about—helping vulnerable individuals find quality homes.
The Key Takeaway
If you’re struggling to make your HMO financially viable, transitioning to supported living could provide a stable, hassle-free alternative—offering better long-term returns while making a meaningful impact.
Are you ready to explore the possibilities? List your property today and connect with care providers in need of quality housing.
