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Funding Your HMO Conversion

By 8 October 2021No Comments

Funding a property project

What is a HMO conversion?

A HMO conversion is the process of changing a property from its current purpose into a House of Multiple Occupancy, which is a house that is shared by three or more unrelated tenants. HMOs offer more cash flow than a standard rental property as rent is charged by the room, making you an even greater profit. On top of that, the government offer a 5% VAT reduction when you convert a property to a HMO, which will save you money on your building costs. Converting a property to a HMO can be costly, as it often requires the interior to be remodeled and the whole property to be redecorated, but if you can finance it, they are a real source of passive income.

There are many rewards when it comes to creating your passive income stream with a HMO but there are also a few risks or difficulties – and that is where Sourced can come in.

Funding Your HMO Conversion

There are several options for initially funding your HMO conversion. You can get a specialist HMO mortgage, which is the cheapest form of financing, but you would be restricted to a conversion of up to 6 bedrooms and you have to prove that your project will be viable, which is difficult as there is risk involved. Alternatively, you could utilise bridging finance which can fund all of your conversion and doesn’t limit the number of bedrooms, although the interest rate is usually higher.

Unique Funding with Sourced

This sounds like a complex decision, but Sourced can help you with all aspects of your project, from training and advice to funding up to 100% of it through Sourced Capital. Only lending to franchisees, Sourced Capital allows you to borrow money based on the end value of your project. They will fund up to 70% of the gross development value (GDV), which means that up to 100% of your purchase price and costs could be covered. As a franchisee, you don’t have to spend hours upon hours completing tedious background checks and because of the high loan to value ratio, your cash injection can be low.

You will have a dedicated support person that can assist you daily with your projects and they will help you assess your deal when you want to apply for funding. When you have secured a loan, the funds will be released to you over multiple drawdowns and you will have your own unique repayment plan.

Who is Sourced Funding for

Sourced Capital is a great option for you as an investor and property developer. Financing everything from flips to light and heavy refurbishments to huge developments, Sourced can help you build your own property portfolio. If you feel that you need some guidance, Sourced can provide you with a tailored plan as well as funding advice that will suit your needs, as the growing network and the use of mentors means that you will have all the tools you need to succeed in property.

Next Steps

To get the process started now and to begin building your own passive income stream with the support and guidance of experts in the property market, download the Sourced prospectus now and have a look!

Sam Clayton

Sam Clayton

Franchise Manager