CASE STUDY – Arranging Finance For The Development Of A Student House In Multiple Occupation (HMO)

Our client, an experienced landlord with an extensive portfolio of student HMO properties, approached Exe Mortgages with an exciting opportunity to expand their investment portfolio.

They had identified a 4-bedroom student property in Exeter that presented excellent potential for value-add development. The property was strategically located but required internal updating and refurbishment to meet modern student accommodation standards.

The client’s vision was ambitious yet well-calculated. They wanted to purchase the property at £325,000 (significantly below the original asking price of £375,000) and transform it into a premium 6-bedroom, 3-bathroom HMO through a comprehensive loft conversion and internal reconfiguration. The property had been struggling on the market and wasn’t secured for the September 2025 university intake, presenting a perfect opportunity for our client to step in.

With refurbishment and extension costs estimated at £90,000 based on comparable projects in their existing portfolio, the client was looking for a financing solution that would allow them to complete the entire project without depleting their cash reserves. Their ultimate goal was to purchase, refurbish, and then refinance to extract all funds invested in both the purchase and renovation, creating a sustainable cycle for portfolio expansion.

The primary challenge our client faced was maintaining optimal cash flow while executing their expansion strategy. As an experienced property investor, they understood that preserving capital reserves was crucial for seizing future opportunities in the competitive student accommodation market. Traditional lending approaches would have required significant upfront capital, potentially limiting their ability to pursue additional projects simultaneously.

The client specifically wanted to improve their cash flow position to keep funds available for further portfolio additions, demonstrating their commitment to rapid but sustainable growth in the student accommodation sector.

Drawing on our extensive network of specialist lenders and deep understanding of the development finance market, we crafted a tailored approach to meet our client’s unique requirements. Our strategy focused on identifying lenders who could assess the property’s future end value post-completion, rather than just its current condition, enabling us to secure higher loan-to-value ratios from day one.

Our personal experience proved invaluable in this case. Having personally undertaken similar loft conversion projects, we could speak with authority about the feasibility, timelines, and potential challenges of the proposed development. This firsthand knowledge allowed us to present the proposal to lenders with confidence and address any technical queries they might have.

We leveraged our strong relationships with bridging finance specialists who understood the student accommodation market and were comfortable with phased funding arrangements. Crucially, we identified lenders who could roll interest charges through the project duration, significantly reducing the client’s upfront cash requirements and improving their cash flow throughout the development period.

We successfully secured an innovative financing package that perfectly aligned with our client’s objectives. The solution provided 75% of the purchase price upfront, followed by 100% funding of refurbishment works released in arrears through carefully structured tranches as the project progressed.

The bridging facility came with a competitive rate, reflecting both the strength of the project and our client’s proven track record in the sector. With a projected end value of £550,000 upon completion, the development would deliver substantial value creation for our client.

The exit strategy was equally impressive. Upon completion, the client will be able to remortgage onto a term buy-to-let mortgage, extracting an estimated 90% of their total investment in both purchase and refurbishment costs. This means they can recover virtually all their initial outlay, creating a self-funding development cycle that enables immediate reinvestment in their next project.

Our client was delighted with both the financial structure and the seamless process. The solution not only met their immediate financing needs but also positioned them perfectly for continued portfolio expansion. By preserving their cash reserves while maximizing their development potential, we’ve helped create a sustainable platform for their ongoing investment strategy in the lucrative student accommodation market.

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