How to Finance Creative (and More Complex) Deals With Ellie Broadhurst

Finding great HMO deals has become harder over the last few years, but creating enough value to recycle your capital and continue growing your portfolio is arguably an even bigger challenge.

In this episode, I sit down with our specialist mortgage finance expert Ellie Broadhurst to discuss what's happening in the lending market right now and where opportunities still exist for investors looking to scale.

🎯 What You'll Learn

• What's happening with interest rates and specialist lending in 2026
• Why refinancing and capital recycling have become more challenging
• A real-world commercial-to-residential conversion case study
• How lenders assess experience on larger, more complex projects
• Why valuations, build costs, and appraisals can make or break a deal
• How to manage risk while scaling your property portfolio

If you're building a HMO portfolio, looking for ways to create more value from your projects, or considering stepping into larger and more creative developments, this episode will give you a practical insight into what's working in today's market and how to approach these opportunities with confidence.

Book a Call with Ellie here: https://thehmoroadmap.co.uk/hmo-mortgage-finance/ 

💻Resources & Mentions

• Join my Accelerator Programme: If you’d like my direct input on your current or next project, you can watch this video or book a complimentary strategy call with me here.
• The HMO Roadmap: Feeling overwhelmed? Access 400+ tools, templates, and lessons to help you start, scale, and systemise your HMO business - all in one place. Join here.
• Facebook Community: Got questions or need support? Come and connect with 10,000+ investors inside The HMO Community here.
• Social: Follow me on Instagram for daily HMO tips, advice, and behind-the-scenes updates here.

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Transcript

[00:00:00] Andy Graham: Hey, I'm Andy. And you're listening to The HMO Podcast. Over 10 years ago, I set myself the challenge of building my own property portfolio, and what began as a short-term investment plan soon became a long-term commitment to change the way young people live together. I've now built several successful businesses.

[00:00:20] Andy Graham: I've raised millions of pounds of investment, and I've managed thousands of tenants. Join me and some very special guests to discover the tips, tricks, and hacks, the ups and the downs, the best practice, and everything else you need to know to start, scale, and systemize your very own HMO portfolio now.

[00:00:40] Andy Graham: Today I'm joined by our mortgage broker, Ellie Broadhurst. Now, our long-term listeners will know that when it comes to mortgages, specialist finance, interest rates, market sentiment, transaction volumes, values, all of that stuff, it's Ellie that we take our advice from. I want to know what's been going on, more importantly, where things are heading in 2026.

[00:01:02] Andy Graham: Plus, I asked Ellie if she could share a case study with us, because I'm getting asked by a lot of people in our community how they can do more complicated deals, more creative transactions, to try and find ways to force more capital value through their projects. Well, today, Ellie is sharing a very interesting project with us.

[00:01:22] Andy Graham: Let's get into it. Hey guys, it's Andy here. We're gonna be getting back to the podcast in just a moment, but before we do, I want to tell you very quickly about the HMO Roadmap. Now, if you're serious about replacing your income, or perhaps you've already got a HMO portfolio that you want to scale up, then the HMO Roadmap really is your one-stop shop.

[00:01:43] Andy Graham: Inside the roadmap, you'll find a full 60 lesson course delivered by me, teaching you how to find more deals, how to fund more deals and raise private finance, how to refurbish great properties, how to fill them with great tenants that stay for longer, and how to manage your properties and tenants for the future.

[00:01:58] Andy Graham: We've also got guest workshops added every single month. We've got new videos added every single week about all sorts of topics. We've got downloadable resources, cheat sheets and swipe files to help you. We've got case studies from guests and community members who are doing incredible projects that you can learn from.

[00:02:13] Andy Graham: And we've also built an application just for you that allows you to appraise and evaluate your deals, stack them side by side, and track the key metrics that are most important to you. To find out more, head to the hmoroadmap.co.uk now and come and join our incredible community of HMO property investors.

[00:02:37] Andy Graham: Hi, Ellie. Great to have you back on the show.

[00:02:39] Ellie Broadhurst: Hi, Andy. Nice to be back. Thanks for having me.

[00:02:41] Andy Graham: It's been a little while, and I want to get a sense check on the market, interest rates, what's happening with values, all of that jazz that we usually catch up on. But for our listener today, what I want to do is also just frame something that I put to you recently.

[00:02:56] Andy Graham: Mm-hmm. There's no doubt that it's a bit harder at the minute to try and force capital value through our HMO projects and then recycle it so that we can reinvest that surplus, and what I'm finding is a lot of our community members and my clients are asking more and more so about more complicated projects, bigger projects, projects that naturally carry more risk but need to be approached in a very different way.

[00:03:19] Andy Graham: So I asked you if you had an example from a lending perspective as well, and I thought it would be good to talk about this today. I know you've got a great case study to share with us, so we're going to have a chat about that today because I think there's a lot of people exploring these slightly more complicated projects at the minute.

[00:03:36] Andy Graham: But before we get there, Ellie, let's just get a sense check on what is going on. Tell us what the market looks like at the minute.

[00:03:43] Ellie Broadhurst: Well, it's been a really strange time, hasn't it? There's so much uncertainty in the world which doesn't seem to be settling down, but yeah, it has been a little bit up and down.

[00:03:51] Ellie Broadhurst: But like I was just saying to you, it's-- there's not really any kind of progression up or down. It just seems to be rates are changing, and I think a lot of the time it depends on when lenders are going out to their funders for money. So is it a good day? What's happening in the straight off homers on that day?

[00:04:10] Ellie Broadhurst: That kind of thing. So we've had some lenders reducing rates. Shawbrook have actually reduced their rates quite considerably. They're now, like, under six percent for kind of your regular HMO-type business, which is really competitive. So we've seen some rates come down. We've seen other rates go up. But then also we're seeing a lot more products on the market, and that is always a good sign.

[00:04:29] Ellie Broadhurst: So when funding is more expensive and getting funds is more tricky, you'll see the lenders will really reduce the number of available products. So you might only have a five-year fixed product with, like, one fee option, whereas when funding is more available, you'll have lots of options. So different interest rates, different fees, different fixed-rate periods, some tracker rates.

[00:04:52] Ellie Broadhurst: You see a whole variety of rates out there, and we are seeing all of those come back. So I think the kind of general trend is that things are improving. But within that, you have got a lot of ups and downs.

[00:05:04] Andy Graham: So a b- kind of news-dependent fluctuations, quite literally.

[00:05:07] Ellie Broadhurst: Completely, and it's really frustrating because I'll quote somebody on Tuesday, and then by the time I get all the documents back from the client later on in that week, like, you feel like you need to go and check the market and make sure that everything's okay.

[00:05:19] Ellie Broadhurst: And then you put an application in, and the client pays for evaluation, and you start gathering documents, and then other rates change and you think, "Oh, I could've done that." But yeah, it's a frustrating time. I think it's one of those times where you've just got to just do it. Like, you can't um and ah. If you want to do something, you've just got to get on with it because you don't really know what direction it's coming, it's gonna end up at.

[00:05:40] Andy Graham: And I think, as you said, there doesn't seem to be a real sort of plan in motion at the minute. We can't- No ... see a huge amount of light at the end of this tunnel right now because it's fairly binary. Either there is an issue in the Middle East or there isn't, and at the minute there still is. Yeah. There doesn't seem to be any sort of sensible solution in place for it, so- No

[00:05:57] Andy Graham: things are just sort of sticking, right?

[00:05:58] Ellie Broadhurst: They are. They are. I mean, there's been a lot of talk over the last couple of weeks about energy prices going up, so I think we will see inflation probably go up towards the end of the year. But then the Bank of England have come out a couple of times and said, "Look, we don't feel that we need to increase the base rate," which is obviously good news.

[00:06:16] Ellie Broadhurst: But there are so many things that go into the pricing of products. Base rate is only one part of that. Swaps are another part, availability of funds, certainty, what people think is, is going to happen. All those things come into it. I mean, gilt prices, for example, have had a big input into where interest rates have gone up because a lot of big investors, like pension funds and the like, have moved money away from more risky areas because of all the things going on in the Middle East, and put it into, like, UK government bonds.

[00:06:47] Ellie Broadhurst: Mm. But because everybody then wants to invest in them, demand goes up, the interest rate goes up, and then that then has a knock-on effect on, on the swap rate. So there's so many things that go into pricing of mortgage products that it is very difficult to say, "Well, you know, as long as base rate stays the same, it should stay the same."

[00:07:06] Ellie Broadhurst: Like, it's just not quite as simple as that, unfortunately.

[00:07:08] Andy Graham: I think a big takeaway at this point in the year is that planning around lower rates or doing a deal now and hoping that your rate's gonna come out at 5% is probably not a wise thing to do. I think you just- No ... need to assume that rates are what they are for a little while.

[00:07:24] Andy Graham: I think over a long horizon, years-

[00:07:27] Ellie Broadhurst: Yeah ...

[00:07:27] Andy Graham: we should still hope to see that average rate come back down, not to sort of pre-COVID levels, but certainly it's sub 5%. And it wasn't that long ago, you know, I got a rate, about 4.5%, which was pretty good and that'd be very hard to get now.

[00:07:41] Ellie Broadhurst: Yeah, it would be. I think where the rates were sitting at around 4.5, those kind of rates pre- in Middle East issues.

[00:07:49] Ellie Broadhurst: We're looking at over 5% for those same rates now. Yeah. But base rate hasn't changed in that time.

[00:07:55] Andy Graham: Yeah, which is interesting. I think there's so many reasons right now, this is part of the conversation, but you take everything that you need to think about with, as an investor, put that investor cap on. I think everything pushes you and forces you to look more at the kind of the long-term horizon than, than the short term.

[00:08:12] Andy Graham: Yeah, yeah. Stack the numbers, build a spreadsheet, look at what that performance is today and the day that you expect to get that refinance, but just remember that that's a snapshot in time. Absolutely. If you give yourself permission to project that performance out over two years, three years, five years, 10 years, with some sensible assumptions, the performance of your investments will look far, far better.

[00:08:34] Andy Graham: But it is a challenge at the minute, as everyone's getting squeezed, everyone's feeling it.

[00:08:37] Ellie Broadhurst: It is a challenge, and I think where a couple of years ago I had quite a lot of clients that would come to me at the beginning of their property journey and want to start doing flips and things like that to try and build a pot of money up to then start investing into other things.

[00:08:52] Ellie Broadhurst: Flips are just such a challenge, like, the property market is really slow. You're not necessarily gonna get those top prices that you probably would have got a year or two ago. There are so many other things going on that I just don't know whether that's something that- I'd be comfortable promoting. Like, there is a lot of clients that I've seen recently where they have extended their bridge, they've had to accept a lower offer because they just need to get off of that.

[00:09:18] Ellie Broadhurst: So where, for example, they were pricing their bridge of, you know, being on the bridge for, say, six or eight months, they're on it for 12 or 14 months, and suddenly that is eating into your profit. If you're accepting an offer that's, I don't know, 5% lower than what you were expecting, again, that's straight off your profit.

[00:09:35] Ellie Broadhurst: So you're still putting in the same amount of work. Your build costs are probably a bit higher than they would've been a little while ago, and then you're spending more on interest and not quite getting what, what you were hoping to out of the end of it. So it is definitely a trickier market to try and make money quickly.

[00:09:53] Ellie Broadhurst: Like you say, I think looking at the long term, absolutely. I mean, that demand for rental is not going anywhere.

[00:09:58] Andy Graham: Well, alongside that, and look, HMOs, as far as I'm concerned, should be the bread and butter of- Mm ... a residential real estate portfolio because the yield is just much, much stronger. But I appreciate that a lot of people do need to try and find those more creative solutions to finding value, forcing it back out of their deals.

[00:10:21] Andy Graham: And sometimes it's best not to look at kind of doing that vertically, doing one HMO after another and expecting you'll just keep recycling the money. Sometimes you need to look laterally and look at a slightly different deal. Yeah. Do things in a slightly different way. So build your HMO portfolio, but alongside some other deals that maybe focus more on the capital creation side of stuff.

[00:10:41] Andy Graham: Maybe they are a bit riskier and they need to be approached in a different way. Hence why we're gonna have this conversation. Now let's chat about the case study that you've done for a client recently, and I thought that this would be good to discuss on the show because I think discussing it with you brings it to life, I think, for our listeners.

[00:10:57] Andy Graham: This is a project that you've helped a client do quite recently, and it was an interesting one. So just sort of give us a bit of an introduction to the case study, Ellie. Can I- Yeah ... what sort of a deal are we looking at here?

[00:11:08] Ellie Broadhurst: Okay. So this is a client that we've worked with before. He works in Plymouth. That is his area. He knows it really, really well. He's done other projects previously, sort of smaller HMOs. He's done some refurbishment refinances. He knows the area really well. He is a builder by trade. So he came to us with a deal which is a commercial unit. So it was, like, two shops sort of attached to each other.

[00:11:33] Ellie Broadhurst: Two shops side by side with office space above both of them. It's a big property. It goes back quite far. This one actually had quite a lot of land behind it, which is why it is quite appropriate for the housing, 'cause you have got some outside space, and it was in, like, a square with some shops, but other houses, so a sort of mixed-use area.

[00:11:52] Ellie Broadhurst: And it had planning lapsed for half of the building to be converted into a house. So there was some sort of evidence there to suggest that he could convert these into houses. So his plan was to convert both properties into houses, one five-bed HMO and one three-bedroom house next door to each other. So that was his initial plan.

[00:12:16] Ellie Broadhurst: Now, he didn't have planning. There was lapsed planning, but there was no current planning in place. So when we haven't got planning, it does make life a little bit more tricky in terms of funding. It's not that easy to get a refurbishment bridge when you haven't got planning in place because you generally haven't got a good uplift on the GDV with it in its current condition.

[00:12:36] Ellie Broadhurst: So there's not a lot of room, there's not a lot of profit in there for the Works costs as well

[00:12:43] Andy Graham: Can I just add to that, Ellie, just so our listeners really understand? So in essence, while that potential is certainly there, it's- Yes ... difficult to kind of almost get anyone to commit to it on paper, i.e., a valuer- Yeah

[00:12:56] Andy Graham: because the planning isn't in situ.

[00:12:59] Ellie Broadhurst: Yeah, the valuer can, and we will always get the valuer to give us a commentary on all of the potential solutions that we've got. So what I'll say to a client is, "All right, so what's your ideal solution? So yes, planning's approved for exactly what you want it to be approved for.

[00:13:12] Ellie Broadhurst: What does that look like?" And we'll always get a GDV on that basis. And then the lender will never work on what we call hope values. There's no hope involved in lending, so it's always about what you can definitely do. So where we haven't got planning for the ideal solution, we will always ask for a backup plan.

[00:13:29] Ellie Broadhurst: So what we need is something that we can do. With vacant commercial, you can normally do something under permitted development. It's not usually what you want to do because you've got rules around windows and things like that that can cause a problem. But generally, you can do something. So that's our backup plan.

[00:13:47] Ellie Broadhurst: What's the GDV for that? Now, what he was gonna do as a backup plan is keep the commercial as it is underneath and convert the upstairs into flats, and he can do that under PD. So they were the two options that we were looking at. What we decided to do on this one is he actually had the cash to do the works.

[00:14:04] Ellie Broadhurst: The works costs were just over 90,000, so not a huge amount of money. He was doing a lot of it himself. So we decided the easiest thing to do would be to bridge the purchase, so we were able to lend him 75% towards the purchase. So he put in 25%, and then he's funded the works costs. Now, with something like that, the lender wants you to have some experience.

[00:14:27] Ellie Broadhurst: They want you to have done something previously, uh, similar, and then they also need to see that you've got the money to do all of that. So that 90,000 for the works has got to be sat in your bank account ready to go. So you have got to have all your ducks in a row for something like this. So that's where it's worked quite well for him because he's done other things that have kind of built him up to this.

[00:14:51] Ellie Broadhurst: So he bought the property for 214,000 So we lent him 75%. He put in just over 50,000 plus stamp duty, plus he's got that 90,000 of costs, and he's converted. At the moment, he's done the five-bedroom HMO. He's done the works for all of that, and he's part of the way through the three-bedroom HMO. He is having a bit of a problem, as these things normally, normally happen.

[00:15:17] Ellie Broadhurst: The planning's been quite back and forth for the house. There's been some things that they want to do that he's not happy with, so it's been a bit of back and forth. But the beauty of this project is that the uplift in value is quite significant. So what we've been able to do is now the five-bedroom HMO is finished, we're now refinancing that.

[00:15:36] Ellie Broadhurst: We will split the title. We'll put that into a new limited company. It's part of a group structure, so there's no stamp duty to pay, and then that will pay off his bridge, pay all of his money back, means he's got the other property unencumbered to worry about The issues that he's got, and then once he's finished that, he'll either sell it or refinance it.

[00:15:56] Andy Graham: So I love these kind of deals for a few reasons. First of all, from a planning perspective, doesn't have planning, but it's got lapsed planning. So the planning risk is naturally just much, much lower. Doesn't- Yeah ... mean you shouldn't pay attention to any changes in policy. Still get the right advice from your planning consultant.

[00:16:11] Andy Graham: Make sure that you've checked in exactly where it is in, in terms of today's planning requirements. But it does significantly reduce the planning-

[00:16:21] Ellie Broadhurst: It does, yeah ... risk. Yeah.

[00:16:22] Andy Graham: So that's the first thing for me. The second thing is there's an element of phasing here, which I think is always such a good way to look at deals.

[00:16:30] Andy Graham: It's not necessarily always the best way or even the most profitable way to do deals, but again, just in terms of risk reduction, lets you get on with a part of the scheme, get moving- Yeah ... keep people busy, put some funds to use. And then in this example, and a great example, actually come out in a really good position that just makes the next phase much easier, much lower risk.

[00:16:50] Andy Graham: And in some cases, and this is what I've done myself, sometimes even just leave that to come back to on, on a bit of a rainy day where there's nothing else going on. Yeah. I haven't been able to- Yeah ... find a project. So these sorts of creative deals at the minute, and I'll be honest, not really easy to find, but I think they're great if you can find them because not only are they much lower risk, but also they can be really, really, really profitable.

[00:17:12] Andy Graham: And I think what you're saying is actually it can be pretty straightforward to get into the deals. Yeah. You don't have to do everything all at once.

[00:17:19] Ellie Broadhurst: Absolutely, and I think this one, when you looked at it to start with, it's a bit like, oh God, he has, he hasn't got planning. It's currently vacant commercial.

[00:17:28] Ellie Broadhurst: There's a lot of potential things there that could be a problem. But actually, like you say, if you break it down, the lapsed planning is a big tick. Having a good backup plan so that if you don't get the planning for what you want- Yeah, with PD ... you have still got something which still, with PD, which still makes sense and is still profitable.

[00:17:43] Ellie Broadhurst: But this is where I see people making money, is the quirky things of there's a slight planning problem, there's a tenant in there that's a problem, because they're the types of properties that most people will be put off by, and that's when you've got less competition and you're able to buy something really quite cheap.

[00:18:00] Ellie Broadhurst: 214,000 for, I can't remember how big it is, but it's a huge building. I mean, a five-bedroom HMO and a three-bedroom house, and he hasn't added any square footage to that. That is just as it is. It's a huge amount of property for the price. So he's spent the 214 plus the 94 plus, for the works, plus obviously finance costs, stamp duty, legals, and then just on the HMO That's been valued at 600,000, so we're able to refinance 75% of that.

[00:18:30] Ellie Broadhurst: He's pulling out 450, so he's got all of his money back out, plus over 100,000 by the time he's paid all of his costs out.

[00:18:39] Andy Graham:That's a fantastic deal Isn't it?

[00:18:41] Ellie Broadhurst: And he's got the unencumbered property

[00:18:43] Andy Graham: Yeah, that and the cashflow from the HMO coming in

[00:18:47] Ellie Broadhurst: Yeah

[00:18:48] Andy Graham: You and our listeners know I develop a lot of flats with my business partners as well, and there's a lot of commercial gain to be sort of exercised and crystallized in those sorts of schemes.

[00:18:57] Andy Graham: But when you're holding stuff at the end, the challenge is always that the rent's just not very good, especially in today's market Yeah Unfortunately, it is hard to find big buildings that you can convert into HMOs on the sort of 10, 20,000 square foot basis. But these sorts of deals where you can turn low-value commercial space into high-value residential space and really sort of maximize the output with a HMO, I, I just think that they are the best possible deals.

[00:19:22] Andy Graham: And like you said, combining that then with these other tactful elements. Let's talk for a second then about some other ingredients that you need for these sorts of deals though, because I don't think that it is as straightforward as sort of just seeing something like this on the street and being able to make it work.

[00:19:36] Andy Graham: There are a few people, I think, that you kind of need around you- Yeah, absolutely ... to help make this happen. Yeah. Did your client have those people around him?

[00:19:43] Ellie Broadhurst: Absolutely, he did, and I think this is a really good example actually of, like, building on what you do, like choosing a strategy, choosing a location, doing it well because you build up that team around you by doing multiple deals in a particular location and, and the same types of property.

[00:20:00] Ellie Broadhurst: And I've had a few conversations over the last couple of weeks with clients that have come to me, and they're really just picking out strategies- I wouldn't say after net because I think there is more, more to it than that. But just, like, I don't know what to do. Do I go to this location or that location?

[00:20:15] Ellie Broadhurst: Do I do HMOs? Do I do commercial to resi? Do I do flips? What do I do? And I think it's really important that as an investor you pick your strategy, and you stick to it, and you do it well because by doing that, you will build that team around you, and you will know the area, the valuer, the rent, the type of tenants that you've got.

[00:20:36] Ellie Broadhurst: You'll know all that inside out, so it reduces your risk around so many other things that you can then afford to take a risk on planning, for example, because everything else sits really nicely. So for this client, he has already purchased a number of smaller properties, so they do, him and his business partner, this one is done on his own, but he does some other things with, with somebody else.

[00:21:00] Ellie Broadhurst: But they tend to pick properties that have planning problems, or tenant problems, or something sort of sitting in the background. So the actual work that needs to be done to the property is minimal, but there is something else causing a bit of a problem. So through doing that, they have got a good relationship with the planning department in Plymouth.

[00:21:19] Ellie Broadhurst: They know the valuer. There's not many valuers in that neck of the woods, so they do tend to end up with the same valuer most of the time, which is quite handy. Built a really good relationship with him. Obviously, they've got us on board. We know what they do. They know how we work. That all works really, really well.

[00:21:36] Ellie Broadhurst: Yeah, licensing team, and this guy's a builder- No doubt ... so he's got his trades. 

[00:21:41] Andy Graham: No doubt. No doubt. Architects as well and-

[00:21:43] Ellie Broadhurst: Yeah. Absolutely.

[00:21:44] Andy Graham: The kind of the magic of being able to get these people to all work together to help you deliver a scheme is so overlooked, in my opinion. A lot of people know that they need an architect and know that they're gonna need a solicitor, but actually it's really making sure that the people that you...

[00:21:59] Andy Graham: Understanding how to split titles and leases and making sure you do it in the right way and the sequencing of all of that events and-

[00:22:05] Ellie Broadhurst: Yeah ...

[00:22:05] Andy Graham: fitting that with exactly what the lender wants, 'cause some lenders want it in a slightly different way to others, freeholds and leaseholds.

[00:22:11] Ellie Broadhurst: Yeah. Yeah. And who owns what, and how it's split, and all the rest of it.

[00:22:15] Ellie Broadhurst: Yeah, it's, it's really important that you have a good team around you, that you can just pick up the phone because you go back to them again and again. You build a relationship with them. Like, I'm obviously prepared to put in the time with my existing clients to go through things that may or may not go anywhere, but that's how it works.

[00:22:30] Ellie Broadhurst: And the same with his solicitor. She's brilliant. We've recommended her to loads of other clients now. She is excellent. But you can call her up and talk her through a scenario, and she'll be able to give you her advice on how that works. So yeah, having that around you is really important. Having the experience, as I mentioned earlier, like the lender will want you to have carried out a similar project previously to do something like this.

[00:22:54] Ellie Broadhurst: When you're looking at what we call heavy refurbishment projects, so anything generally that needs planning falls into a heavy refurb, there's two different ways that you can fund it. Now, if the lender is funding the works for you, so a refurbishment bridge, we can be a lot more flexible on your experience because we've got an asset manager involved, or the lender will be much more heavily involved in terms of the schedule of works, um, the plans, your architect, your builder.

[00:23:19] Ellie Broadhurst: They will meet the asset manager. Like, there's just more checks that go on with that.

[00:23:24] Andy Graham: Can I just clarify? Are you talking about like a monitoring surveyor-

[00:23:28] Ellie Broadhurst: Yes ...

[00:23:28] Andy Graham: or somebody in that role there? Yeah. Yeah, okay. Yeah, 

[00:23:30] Ellie Broadhurst: So either an asset manager or monitoring surveyor, depending on the extent of the works. Okay.

[00:23:34] Ellie Broadhurst: But that's like an extra person, an extra professional that is involved with those, the refurbishment that you're doing. So the risk is lower because it is being monitored more heavily, so we can rely a bit more on your contractor's experience. We can be a little bit more flexible with your experience.

[00:23:51] Ellie Broadhurst: If you are funding the works yourself, and it's just a bridge for the purchase, the lender generally is a bit more stringent on the experience because you'll kind of be left to your own devices, so they want to make sure that you're going to be able to do it, finish it. If anything goes wrong, you've got some experience to go and find a new contractor, all those things in place.

[00:24:13] Ellie Broadhurst: So you do need to have a bit more experience if you want to do something like this.

[00:24:18] Andy Graham: I think that that makes sense. Mm. Question from me then, Ellie. In this example, if hypothetically this investor didn't have that cash themselves in their own bank account but was able to borrow it from a friend or a family member or a private investor-

[00:24:33] Ellie Broadhurst: Yeah

[00:24:34] Andy Graham: could it have still been pieced together in the same way?

[00:24:36] Ellie Broadhurst: Yeah, yeah. Absolutely, that would've worked. Absolutely, no problem. The thing with private investors, I think there's a couple of things to look at. One is have we got the right people on the application? Like, the people with the money, with the experience, are they the ones that are on the application signing the personal guarantees so we're tying them down?

[00:24:52] Ellie Broadhurst: So if you've got someone who's got no experience, and they're putting in no money, then-

[00:24:58] Andy Graham: It's a red flag

[00:24:59] Ellie Broadhurst: It's a red flag. For everything. But in this example, you've got to have a bit of experience. So if you've got the experience that you're bringing to the table, you absolutely don't need to be bringing the money to the table as well, so that's the first thing to look at.

[00:25:11] Ellie Broadhurst: And the second thing is have we got a really clear exit route of how we're repaying that investor? In this example, there's loads of profit, so we're absolutely comfortable. He needed to give or take 100,000 for the works costs. He could've easily borrowed that because we've got plenty of money on the refinance to be able to repay that investor, so yeah, that would be no problem at all.

[00:25:31] Ellie Broadhurst: That would be another way to do it.

[00:25:33] Andy Graham: I think something that strikes me from this deal as well is that, and you've said it a few times, it clearly does need experience, but it's not a huge step in experience. And I, I guess

[00:25:44] Ellie Broadhurst: no ...

[00:25:45] Andy Graham: thinking about the position a lot of our community members are in, they perhaps want to get their first or second project underway, and what they would really like to do, and I think most of us, we would like to do this deal every time, wouldn't we?

[00:25:56] Andy Graham: Of course. Of course, yeah. Why wouldn't we? You know- Yeah ... lots of capital uplift, great cash flow at the end, all our money back out. But it's hard to find them, and it's hard to piece it all together without that experience. And what I found, and I've talked about this on the show a lot, more so in the last sort of 18 months as it has become harder to kind of force money back out through deals, people procrastinating and, and almost stagnating on that first deal because they can't see a solution to getting enough money back out to do the next deal.

[00:26:24] Andy Graham: Yeah. And what I keep trying to tell people is, look, it's far more important that, A, you just get some good cash flow from a good asset, so focus on your cash yield, and two, you just get that experience under your belt. You get it right. You don't get it wrong. Yeah. When you've got that under your belt, it's gonna be much easier to go and look at more creative projects, to get buy-in from investors, lenders, and other people in the team that need to be a kind of a part of making these sorts of things happen.

[00:26:52] Ellie Broadhurst: Yeah, absolutely. 

[00:26:54] Andy Graham: And ultimately, and I tell everybody this, I do some pretty big deals, and I like to remind everyone that I don't just have millions of pounds down the back of the sofa that I can pull out to say, "Hey, here you go. I'm gonna buy that. I'm gonna spend all this money in the refurb." You know, we largely rely on borrowing a lot of the money to do that, but we can only do that because we have that experience. So

[00:27:13] Ellie Broadhurst: Absolutely, yeah ... I

[00:27:14] Andy Graham: guess what I'm saying is just because you've got a bit of cash to do the first deal doesn't necessarily mean you have to be contingent on getting money from that deal and putting it into every subsequent project thereafter. There are more creative ways.

[00:27:26] Ellie Broadhurst: No. Absolutely, and I think if you assume that your first deal's got to be the perfect deal, I don't think you'll ever do the deal.

[00:27:32] Ellie Broadhurst: Like, it never is gonna be perfect. And even if it's perfect on paper, in reality it's not going to be perfect because your build costs will be more than you expect. Your GDV might not quite be what you expect it to be. Like, it won't take the exact amount of time that you've allocated for the build and the refinance and getting a tenancy.

[00:27:49] Ellie Broadhurst: Like, nothing goes perfectly to plan. But like you say, unless you do your first deal, there's never gonna be a second, and I think the second one is usually are better in terms of you're more experienced, you understand, particularly if you're looking at, like, repeating roughly what you're looking to do.

[00:28:07] Ellie Broadhurst: You know the area, you know your GDV. Hopefully you've got a good builder and you can use them again. Like, all those other things kind of fall into place, so you are able to take a bit more of a risk on something. You could do a seven-bedroom or an eight-bedroom HMO instead of a six and, and not have the planning for that to start with.

[00:28:24] Ellie Broadhurst: You've taken that little bit of extra risk. But unless you've done the first one and the first one's worked, yeah, there's not gonna be the second one. And the slightly riskier ones will, in theory, give you a higher reward. That's generally how life works as long as it all goes to plan.

[00:28:40] Andy Graham: Yeah, that's how it works in our game, isn't it?

[00:28:41] Andy Graham: Yeah. And, and also just having that cashflow from that first project or second project- Yeah, yeah ... behind you, it just takes the edge off-

[00:28:48] Ellie Broadhurst: It does ...

[00:28:49] Andy Graham: a lot. Repayments and debts to repay and things like... Just having that extra 1, 2, thou- 3,000 pound, whatever it is a month, coming in.

[00:28:55] Ellie Broadhurst: I think that's the other thing, that people think that they need to get all of the money back out on the refinance, but actually, yeah, if you've got a well-yielding HMO, you could make 24,000 in a year sat there just...

[00:29:07] Ellie Broadhurst: Not, not doing nothing. That's not what I mean, but you know what I mean. You haven't done another project and you've got that extra money sitting in your bank account. So there are lots of ways to get to that point, but I think the key thing for me is really understanding what it is that you are trying to achieve and understanding the location that you're in, the type of tenant, the type of property, really understanding what you want to get out of it all, and then building a team around you that works well for the type of business that you want to do.

[00:29:37] Andy Graham: Definitely. Well, thank you for sharing a great case study with us there, Ellie. I'm sure that that will have enlightened a lot of people and given them perhaps the encouragement to maybe think about and start looking at some of these slightly more creative deals. And for anyone who's not quite there yet, just doing their first project, just focus on getting that right first and then move on and look at these more creative ones.

[00:29:55] Andy Graham: Just sort of off the back of this, Ellie, it sounds like the valuation for the HMO on this project went really well.

[00:30:01] Ellie Broadhurst: Yes.

[00:30:02] Andy Graham: Although I don't know what the expectation was, but just I suppose anecdotally, what's the general feeling at the minute? A mixed sentiment I would say in the market at the minute in terms of valuations.

[00:30:14] Andy Graham: HMOs getting commercial valuations, especially in some locations are getting a bit of press at the minute. I would say, for example, Bolton's a good example, really, kind of people struggling with refinance valuations. They've been operational for a few years. Clearly are not performing too well. But what are you finding?

[00:30:30] Andy Graham: 'Cause it sounds like actually that's not been the case. Yeah.

[00:30:33] Ellie Broadhurst: That's not the case, no. It's not the experience that we've had. I mean, I will caveat that by saying that a lot of the business that we're doing at the moment that I'm seeing is properties that have recently been refurbished. And I think on a investment value, if you are purchasing a property, spending upward of 100,000 on the refurbishment, and then refinancing immediately, that is the ideal time to then try and get an investment value.

[00:30:58] Ellie Broadhurst: I think we've got to be really careful because anything up to and including six bedrooms, the majority of lenders will not allow you to have an investment value. So I know I talk about it a lot, but you've got to be really specific about the lender that you are going to, and that's, like, a big part of my job is making sure that we've got the right lender and then we've got the right valuer because even if you go to a lender that will allow you an investment value, unless you're specifically choosing the valuer that goes and attends the property

[00:31:25] Ellie Broadhurst: In Luton recently, we've done loads in Luton, always get an investment value, never a problem. Couldn't use this particular valuer with this lender. The client was quite rate-sensitive. We decided to give it a go, and it's coming quite a lot lower than she was expecting. And if you read the commentary, it's not an investment value, although that was a tricky property because it was a purpose-built, like, townhouse, six bedroom, six bathroom.

[00:31:50] Ellie Broadhurst: It's not been converted. It was built, I think, don't know, maybe 10 years ago. It's in good condition, but it's not Styled, panelled walls, brand new. Something that somebody would buy with an uplift for instead of going and doing it themselves. It is quite a plain property. The layout is there. They're big rooms.

[00:32:12] Ellie Broadhurst: They're all en suite. That's there, but it's not brand new. It is a tricky one, but I had one last week. The client was expecting 275 for a five-bed HMO. Came in at 325

[00:32:22] Andy Graham:Oh, wow. Quite a bit more then.

[00:32:24] Ellie Broadhurst: Yeah, yeah. Good percentage on top of what he was expecting, so that's a good example. Other ones that have come in as the client was expecting, this 600 was good.

[00:32:33] Ellie Broadhurst: He was expecting around that. Yeah, we got that. So I think the other thing is, is always expectations versus reality, isn't it? It's, it's very hard to say or to pick one example of something and say, "Oh, did client didn't get what they wanted," but was the client's expectations- ... matching what was actually going to happen?

[00:32:50] Ellie Broadhurst: I mean, spoke to a client the other day, and she wants to convert this property into a six-bed HMO. I've given her multiple examples of other properties in a similar location that have got a certain amount of money on the GDV, and she's expecting quite a considerable amount more for not really any reason.

[00:33:08] Ellie Broadhurst: And then, yeah, I don't think she's gonna get it. The valuation happened the other day, and she was there and met the valuer, and the, the general feeling is that she's not gonna get what she thinks. But were her expectations correct in the first place? Possibly not.

[00:33:20] Andy Graham: I think it's been a while since we've skipped over an episode without just reminding people of that.

[00:33:24] Andy Graham: There's an expectations versus reality thing that we all- Yeah ... need to be aware of. This is, as investors, what we should be doing and knowing, uh, better than anybody else. And it's all well and good being optimistic, but I think if optimism is the plan, then we're kind of doomed to fail, really. We have to be realistic and plan on that basis

[00:33:43] Ellie Broadhurst:  Absolutely  If it all comes in higher than you're expecting, like, happy days, that's extra money that you weren't expecting. But I think it's got to work on realistic numbers. Otherwise, yeah, like you say, you're doomed from the start, aren't you?

[00:33:54] Andy Graham: And I want to make a point here that we're not saying you have to be pessimistic.

[00:33:58] Andy Graham: If you are pessimistic when you look at deals, it's good to be pessimistic and stress it and see what that looks like in that event- Yeah ... in that scenario, but you wouldn't buy something on the presumption that it's not going to perform as well as- No ... you think it should do in the market. So, and if you try to stack deals and buy them on that basis and lend on that, you'll find the problems.

[00:34:18] Andy Graham: You'll just engineer yourself out of the deals.

[00:34:20] Ellie Broadhurst: You'll never buy anything if... I get some clients that come to me with, like, wildly high build costs, and obviously I see a lot of schedules of works. I know roughly how much things will cost in different locations, but rough, oh, very roughly. But a guy came to me the other day and it's like, that, sure you could buy and build a whole new house for that.

[00:34:41] Ellie Broadhurst: It just seemed like a wild amount of money. But then if you put that figure into your deal stacker, nothing's going to be profitable. That's right, yeah. So you won't buy anything. Yeah, you have got to work off realistic numbers. But, yeah, I mean, go and get a builder to go round to a house, even if it's not the house that you end up buying, get a build quote.

[00:35:01] Ellie Broadhurst: If you're looking at converting a house to a six-bedroom HMO, and it is a terraced property, you're going to be doing the same thing. It's be the same cost of adding bathrooms, small extension, loft conversion. It's quite standard, so know your numbers. Add a 10% contingency of course, but you don't need to Go crazy

[00:35:19] Andy Graham: It is hard, especially without experience, to know build costs in detail.

[00:35:23] Andy Graham: And it is one of those things that I find I have to help my clients with a lot who haven't been there and done it. But still, the truth is, you just got to put the work in to getting as close as you can to an accurate- Yeah ... figure before you buy the property. It isn't easy to get builders to come and have a look at the property for you before you've even bought it, or before you know whether or not they're gonna get appointed on the job.

[00:35:44] Andy Graham: But anecdotal advice, read through the case studies, speak to people. Yeah Have as many conversations as possible. There's data out there, so. And a lot of people I find don't want to do that work, or don't necessarily know that they should do that work, but-

[00:35:56] Ellie Broadhurst: Yeah ...

[00:35:56] Andy Graham: your numbers are really sensitive to build costs.

[00:35:58] Ellie Broadhurst: They are, and I think particularly if you're buy- um, using refurbishment bridging, because the lender will lend you 70% of your GDV, so the GDV number is key. But also, that 70% is made up of your build costs, your contingency, fees, interest, and then whatever is left is your day one loan. So if you're overestimating your build costs, or underestimating, your day one loan will be very inaccurate.

[00:36:25] Ellie Broadhurst: So- Mm ... how do you then know whether you can afford to do it or not if the other pieces of the information aren't there? I mean, generally I find that people do come to me with a build quote when they need to, and particularly if you're looking at refurbishment bridging, the lender will want your build quote.

[00:36:44] Ellie Broadhurst: So it's all got to be in place before completion.

[00:36:47] Andy Graham: Well, that's a good piece of information to know as well, because I think a lot of people do still underestimate how important that piece is. They just want to make their best guess and hope that nobody really asks too many questions, but clearly, actually

[00:37:02] Ellie Broadhurst: They absolutely do.

[00:37:03] Andy Graham: That's not gonna fly. Ellie, I think this has been a really useful conversation, really interesting conversation. I think we might have to, when all of this deal completes, see if you can introduce us to your client, because this sounds like an incredible case study- Yeah ... that we would love to feature at some point.

[00:37:16] Andy Graham: Yeah, yeah. But thanks for sharing it, because I think it does sort of give us and our listeners that insight into these slightly more creative projects. I think it's great to know that they are there, that they can be done. It doesn't have to be too complicated. There are a few steps and some other considerations.

[00:37:29] Andy Graham: But I think it is a great thing, especially with the market the way it is at the minute, to be thinking about alongside cookie cutter type of HMO projects that perhaps just aren't able to recycle as much cash out- Absolutely ... right now as, as they used to be able to, or we would hope that they could.

[00:37:45] Ellie Broadhurst: Yeah.

[00:37:45] Andy Graham: As always, guys, if you are looking for lending, whether to buy something new or to refinance something, make sure you go and speak to Ellie. If it's to do with specialist lending, if it's HMO or a commercial project, something more complicated, please go and speak to Ellie. There's so much nuance to this stuff that if you don't know, it's gonna be very difficult to get the right sort of lending and the terms that you want and need.

[00:38:07] Andy Graham: Ellie will listen to you and- Put you in front of the right lender. That's basically what you do, Ellie. You kind of, you're a matchmaker

[00:38:15] Ellie Broadhurst: I'm a matchmaker. But come and talk to me as early as you like. Don't ever think, "Oh, I'm not quite there yet," because I think if you can find out what you're able to do, you might be able to do more than you thought.

[00:38:27] Ellie Broadhurst: You might be able to borrow more than you thought, or you might be able to achieve more than you can- you thought in terms of, like, the scale of the project. So come and have a chat with me and we can talk it through. Yeah, don't ever feel like you're wasting my time or you're not there yet. It's absolutely not a problem.

[00:38:41] Ellie Broadhurst: Thanks, Ellie. I enjoy those initial calls.

[00:38:43] Andy Graham: We've actually made that easier- We have ... than ever for our community members. Yes. Because if you head to the hmoroadmap.co.uk/ the services page for Ellie, so our financial services, mortgages, you can actually book a slot in Ellie's calendar and you can just have a chat about your project, which is great.

[00:38:59] Ellie Broadhurst: Absolutely. Super simple.

[00:39:01] Andy Graham: Brilliant. Ellie, as always, been an absolute pleasure. Thank you for telling us what's happening, I suppose, on the other side that we don't often get to see. And I'm looking forward to having you back on the show soon.

[00:39:12] Ellie Broadhurst: Yes. Thank you very much.

[00:39:14] Ellie Broadhurst: We'll speak to you soon. 

[00:39:18] Andy Graham: That's it for today's episode, guys. Thank you for tuning in. Hope you enjoyed that conversation with Ellie and I. Hope you found it useful. I'm sure you did. Big thank you to Ellie, as always, for joining me on the show. Now, if you do want to speak to Ellie, just head to the hmoroadmap.co.uk/hmomortgagesandfinance.

[00:39:38] Andy Graham: You'll find a tab and a page there, and you can find out a little bit more about Ellie's services. But you can actually book yourself, like I said, straight into Ellie's diary to have a chat. If it's early stages on your project, now's the time to have that conversation with Ellie, because there's a lot of stuff that you might not be thinking about that Ellie can help you start thinking about to prepare.

[00:39:58] Andy Graham: Of course, if you want to learn more about investing in HMOs, get yourself signed up to the HMO Roadmap. Everything you need to start, scale, and systemize your HMO property business is waiting for you inside there. And if you're ready to take things a bit more seriously, maybe you're already underway, you want to really scale things up, but you need that helping hand.

[00:40:16] Andy Graham: You want someone in your corner with you. Well, if that someone is me, head to the show notes. You'll find a link there, and you can watch a video. You can find out a little bit more about what working with me looks like. And if you want to speak to me, we can jump on a strategy call to discuss what's going on in your business, where you want to get to, and whether or not I can help you.

[00:40:35] Andy Graham: Thanks again for tuning in, guys. And don't forget that I'll be right back here in the very same place next week. So please join me then for another installment of the HMO Podcast.