Case Study 5: Super HMO to Aparthotel
When I first came across The Kings in Chester, I knew it marked a turning point in my investing strategy. Up until that point, most of my investments were focused in lower-value, high-yield areas like Ellesmere Port—solid cash-flowing locations where yields were strong due to lower purchase prices. But as my portfolio grew and cash flow became less of an immediate concern, my focus started to shift.
This case study isn’t just about the numbers—though they’re impressive. It’s about how and why I changed my approach, and how understanding market cycles, capital growth potential, and portfolio flexibility can transform your long-term returns.
Moving Up the Value Chain
Until this point, I’d never bought in Chester. Despite being only 10 miles from my usual investing patches, I’d always seen Chester as a “too expensive” area. But the Watergate Street deal (another Chester project) helped shift my mindset. We proved there that you can still extract high return on capital employed (ROCE) in high-value areas, as long as you’re adding value and recycling your funds smartly.
With Watergate Street, we hit a high ROCE through strategic refurbishment and intelligent refinancing. That opened my eyes: you don’t need cheap properties to get high returns—you need the right properties, bought below value, with clear upsides.
That realisation set the stage for this next deal: The Kings, a 14-bedroom en suite guesthouse with a two-bed owner’s flat.
Finding the Deal: Direct-to-Vendor in Lockdown
I sourced The Kings during the first COVID lockdown in 2020. It had previously been in auction with a guide of £950,000+, failed to sell, and was now sat with a high-street residential agent—who, frankly, had no clue how to market a commercial guesthouse.
After spotting a couple of price drops, I sent a targeted direct-to-vendor letter, and sure enough, I got a call. The sellers were a retired couple who were done with running a guesthouse—especially during a pandemic. Their priority? To downsize into a bungalow, release equity, and stop working.
We agreed to buy it for £765,000.
This was a textbook case of motivated sellers, timing, and understanding the vendor’s real needs—not just chasing discounts.
Buying Strategy: Portfolio Refinance in Action
We bought this using portfolio refinancing, one of my favourite tools once you’ve built some equity elsewhere. At the time, I still had development finance on the Phoenix Club (another project), so we structured a portfolio deal with Lloyds, securing against both properties.
That allowed us to purchase with just £50,000–£70,000 additional capital, topping up what we couldn’t pull from the refinance. The sellers also agreed to a vendor loan for the shortfall, repaid monthly from the cash flow.
This is a powerful example of how creative structuring—even without a huge cash injection—can unlock deals once you’ve got a few properties under your belt.
Initial Use: From Guesthouse to Boutique HMO
When we completed in November 2020, we were heading into the second lockdown. The short-term let market was frozen, but the property already had an HMO licence, and the sellers had started transitioning to a hybrid model (short lets and longer ASTs).
So initially, we ran it purely as a 14-room HMO, all en suite, plus the owner’s flat, which we listed on Airbnb as serviced accommodation. The refurb was minimal: just two kitchens upgraded, with total refurb and buying costs coming to around £40,000. All-in, we were at £805,000.
Performance: Numbers That Work
Let’s look at the key numbers and performance:
Purchase Price: £765,000
Total Spend (inc. refurb and costs): ~£805,000
Estimated Current Value: ~£1.1 million (based on 8.5% yield valuation, which I consistently achieve with recent refinances)
Monthly Rent Roll: ~£9,200
HMO Rooms: £7,700
SA Flat (Airbnb): ~£1,500 net
Monthly Running Costs:
Portfolio finance: ~£2,000
Management: Fully managed
Utilities: ~£700/month (now higher due to energy hikes)
Cleaning: ~£250–£300/month
Net Cash Flow: ~£4,800–£5,000/month
It’s worth noting that our interest rate is just over 3% fixed for five years—a fantastic rate we locked in before the hikes. That fixed finance is now an asset in itself, so we’ve deliberately held off refinancing despite the equity uplift.
Strategic Flexibility: HMO vs. Apart-Hotel
Recently, we conducted a feasibility study to convert this into a 10-unit apart-hotel. The demand is there, and structurally it’s possible. But here’s the thing: in Chester, HMO demand for high-quality en suite rooms is off the charts.
So instead of jumping into full-service accommodation, we’re running a test: we’ve upgraded one room to a luxury spec and listed it at £700/month. If that holds, the strategy may shift again—to a high-end boutique HMO model, pushing both cash flow and tenant quality.
That’s the power of “unicorn” properties—versatile assets in great locations, capable of delivering value in multiple ways.
Key Lessons and Takeaways
Evolve Your Strategy
As your portfolio grows, revisit your strategy. Early on, I was chasing yield. Now, I’m balancing yield, capital growth, and flexibility. Your goals will change. Your portfolio should too.Direct-to-Vendor Still Wins
Even in a hot market, relationships matter. A simple letter and understanding the seller’s real needs got me £185,000 off the original guide.Use Portfolio Refinance to Scale
When you’ve added value to other assets, leverage them. Structuring deals like this is a key part of what I teach in the Property Unicorn Club.Know Your Market
In Chester, boutique HMOs currently outperform short lets in stability and margin. Local knowledge always trumps national trends.
Want to Learn How to Do Deals Like This?
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How to find and fund unicorn properties
Advanced deal structuring
High-yield strategies in high-value areas
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If you want to learn how to turn guesthouses, tired properties, or commercial units into profitable long-term assets, this is your blueprint. No gimmicks—just strategy, systems, and solid fundamentals.
Stay strategic,
Rob