In our recent Property Auction Hunters YouTube video, we covered a property which was well documented in the December 2021 article of PIN. Richard Bowser, the editor, had a conversation with Claire Farrington-Brown, one of the Farrington sisters, who was involved in creating a 40-bedroom Mega HMO in Swadlincote. This property has a very colorful history and a very dramatic turn of events, which we will cover in this article.

However, the reason for the article is to shed light on opportunities that are present in the market. Things discussed in this article are likely to happen again in the near future, so look out for the patterns and opportunities that you might want to exploit.

So that 40-bedroom HMO, or actually a cluster of 4 x 10-bedroom flats, was initially purchased by the Farrington sisters for £400,000 in 2019. They revised the planning on this as initially it had planned to convert the former care home into 14 flats. The new planning for 4 x 10-bedroom HMOs was then granted and implemented at a cost of approx. £870,000 so with a total spend of £1.27m, they created a very high-income-producing asset.

This was then sold to aggregators that were buying large amounts of properties and then putting them together as a portfolio, pre-letting those large buildings to Community Interest Companies (CICs) at quite high rents and leases of c. 15-20 years. Those portfolios were then sold to HomeREIT at valuations reflecting 6-7% yields so in many instances at top values or even well beyond that.

Everything was fine until the CICs started going bust and rental payments were not being collected on time. The HomeREIT share price started plummeting and asset managers started to sell off the properties through Allsop Residential auctions in order to pay down the loans that were running close to term.