HMO Conversion
Bolton

An experienced HMO operator had found a former office building in Bolton town centre that was perfect for conversion to a 12-bed licensed HMO. The purchase price was £480k with estimated conversion costs of £470k. The building had been empty for two years and was in poor condition — no functioning kitchen or bathrooms, outdated electrics, and asbestos in the ceiling tiles.

The property needed a change of use from commercial to residential (C4 HMO) which was pending but not yet granted. The asbestos required a specialist removal survey before any works could begin. The building was also in an Article 4 direction area, meaning the HMO licence needed full planning permission. Most bridging lenders won't fund properties with asbestos or pending change of use — and the combination of both was a deal-breaker for the first three lenders we approached.

We found a specialist lender from our panel who had funded HMO conversions in similar condition before. The key was presenting the deal with a full project appraisal — architect's drawings, a QS cost schedule, the asbestos removal quote, and the operator's track record of 8 successful HMO conversions. The total facility of £950k against a £480k purchase effectively meant the borrower needed additional security to bring the LTV into an acceptable range. We cross-charged a buy-to-let property the operator owned in Wigan, which brought the combined security to a comfortable 70% LTV with a personal guarantee. We structured the facility with the purchase price drawn on day one and the build costs released in three phased drawdowns against completed works. The lender accepted the pending planning on the basis that the pre-app response from the council was positive.