Real income on a real block — but the agent's investment pack overstates the case in five separate ways. The 10.97% gross yield is genuinely attractive. After realistic operating costs for a 10-flat HMO-style block (insurance, voids, management, repairs), Premier-modelled true net yield is ~6.8%, not the 9.45% claimed. The block is a cash-buyer or low-leverage proposition. Don't bid above £880,000.
A double-fronted Victorian end-of-terrace house on Sherbourne Road in Acocks Green, an inner-suburban Birmingham postcode (B27) approximately four miles south-east of the city centre. The building has been internally subdivided into 10 self-contained flats, each with its own lounge/bedroom, en-suite bathroom and kitchenette.
Total floor area is 2,939 sq ft, giving an average flat size of around 294 sq ft. This is bedsit / studio scale — at or below the lower end of the Birmingham market for self-contained units. Several photos in the agent pack show flats that are configured as combined lounge + bed + kitchen + en-suite in a single ~28 m² room.
The property is freehold, fully tenanted, and the agent claims a current gross income of £103,140 per annum (£8,595 pcm). Tenants are reported to have been in place over two years on standard tenancy agreements with on-time payment history.
The Let Property "Investment Pack" presents a 9.45% net return. Premier modelling lands at roughly 6.8%. The gap is not because Premier is bearish — it's because the pack contains five specific overstatements.
| Pack Claim | Why It's Wrong | Premier Number |
|---|---|---|
| Purchase price assumed at £1,300,000 | The property is listed at £940,000 OIRO. Modelling on £1.3M inflates the deposit, SDLT and headline maths. | Use £940,000. Or your bid figure if lower. |
| Mortgage at 5% interest-only | 10-flat HMO-style blocks attract commercial portfolio mortgages, not standard BTL. Current rates 6.5–7.5% IO. | Model at 7.0%. On £705k borrowed @ 75% LTV, that's £4,113/mo, not the £4,063 quoted. |
| Buildings insurance £15/month | A 10-flat multi-occupancy block at this scale insures at £150–£250/month, not £15. Off by an order of magnitude. | Model at £200/month (£2,400 pa). |
| No void, repair or comms cost line | 10 turning units = realistic 5–8% void rate. Communal areas, fire systems, gas/EICR, repairs across 10 flats add up. | Model voids 6%, repairs 8%, communal/utilities £3,500 pa. |
| Sale comparables = 7-bed and 12-bed family houses | A 10-flat block is a different asset class to a single mansion of equivalent footprint. Investor buyers, not family buyers. Yields, not £/sq ft. | Comparables should be Birmingham 8–12 unit blocks. Premier-modelled fair price £860–940k. |
Three scenarios, all priced at the £940k listed price (not the agent's £1.3M assumption).
| Line Item (annual) | Cash Buyer | 50% LTV | 75% LTV (Pack) |
|---|---|---|---|
| Gross rental income | £103,140 | £103,140 | £103,140 |
| Less: voids @ 6% | −£6,188 | −£6,188 | −£6,188 |
| Less: management 10% | −£10,314 | −£10,314 | −£10,314 |
| Less: insurance (multi-occ block) | −£2,400 | −£2,400 | −£2,400 |
| Less: repairs & maintenance 8% | −£8,251 | −£8,251 | −£8,251 |
| Less: communal utilities, fire, gas, EICR | −£3,500 | −£3,500 | −£3,500 |
| Net operating income (NOI) | £72,487 | £72,487 | £72,487 |
| Less: mortgage interest @ 7.0% IO | £0 | −£32,900 | −£49,350 |
| Pre-tax cash flow | £72,487 | £39,587 | £23,137 |
| Yield on cash deployed | 7.71% on £940k | 8.42% on £470k | 9.84% on £235k |
| Tier | Risk | Mitigation |
|---|---|---|
| 🔴 HIGH | Planning / use class. 10 self-contained units in a Victorian house — confirm the conversion has full planning and Building Regs sign-off, and isn't operating under a sui generis HMO that may face licensing review. | Specialist solicitor reviews planning history + HMO licence. Material to whether this is buy-able at all. |
| 🔴 HIGH | Refinance risk. 10-flat blocks are commercial-mortgage territory. Lender appetite has tightened materially since 2023. A 75% LTV may not be achievable on this asset class today. | Pre-secure agreement-in-principle from a portfolio BTL lender before bidding. Many investors model 75% and finance at 65%. |
| 🟡 MED | Renters' Rights Act 2025. No-fault eviction (Section 21) abolished. Periodic tenancies only. Rent rises restricted. The agent's "tenants in 2 years+" framing is now harder to monetise via repositioning. | Underwrite the rent at the existing level for 24 months. No assumption of repositioning uplift. |
| 🟡 MED | EPC compliance across 10 flats. MEES requires E minimum now, C from 2028 (proposed). 10 EPCs to renew, possible energy works on a Victorian building. | Demand all 10 EPCs in legal pack. Budget £15–25k for any pre-2028 upgrade works in Year 1 capex. |
| 🟡 MED | Buyer's Premium. The agent notes "a Buyers Premium will apply" — this is undisclosed extra cost on top of the £940k. | Get the premium quantified in writing before any offer. Treat as cost addition, not separate. |
| 🟢 LOW | Tenant default. 10 separate tenancies = strong income diversification. One leaver = 10% income loss, not 100%. | N/A. The diversification is a structural strength. |
10.6% below asking. Fair compensation for refinance, planning and Renters' Rights overhang. The Premier opening bid.
Acceptable only with: (1) all 10 EPCs ≥ E confirmed, (2) full planning + HMO licence in pack, (3) Buyer's Premium quantified.
At asking, true net yield no longer compensates for the risk profile. Premier walks. There will be other Birmingham blocks.
10 self-contained tenanted flats producing £103k of gross rent in a stable Birmingham postcode is a genuinely useful piece of cash-flow real estate. The income is real, the tenants are paying, the diversification is structural. This is not a bad asset.
But the Let Property investment pack is selling fiction — an inflated £1.3M reference price, a £15/month insurance figure, no void or repair reserves, irrelevant family-house comparables, and a "9.45% net return" that survives no honest stress test. Premier-modelled true net yield is closer to 6.8%, which is decent but not the headline 9.45%.
Right buyer: a cash buyer or low-leverage portfolio holder who values reliable diversified income at ~7% net and is not relying on the agent's stress test. Wrong buyer: a 75% leveraged investor who reads the pack and underwrites at 9.45%. Bid £840,000. Stretch to £880,000 only with a clean pack and HMO licence confirmed. Walk at asking.