Ins and Outs of Buy-to-Rent: House of Snaps’ $10 Million Portfolio Success Story

Uvika Wahi

Ins and Outs of Buy-to-Rent: House of Snaps' $10M Portfolio Success Story

At the recent Scale Show Barcelona, Rental Scale-Up curated and hosted the Knowledge Stage, a unique platform featuring exclusively property managers as speakers—a first in the industry. The session titled “Investing in a $10m Real Estate Portfolio over 10 Years” by Simon and Laura Napper from House of Snaps was a highlight, offering invaluable insights into their decade-long journey in property development and rental management.

The Nappers detailed their strategic approach of buying, refurbishing, refinancing, and renting properties. They shared a specific case study of converting a property into a holiday let, outlining the financial aspects, from the development phase to cash-out refinance and annual profit projections. 

This session provided actionable advice on navigating financial hurdles, leveraging mortgages, and optimizing rental operations, making it a must-follow for property managers aiming to scale their portfolios and enhance profitability. The emphasis on sharing real-world tactics by experienced managers added a practical dimension, ensuring that even those who couldn’t attend in person can benefit from these insights.

What Is The House of Snaps?

Simon and Laura Napper, the duo behind House of Snaps, have spent the last decade mastering the art of property development. Their journey began in 2013 with a joint venture, and today, they command a portfolio of 29 sites across the UK and US. Their expertise spans new build developments, commercial to residential conversions, full renovations, and both short and long-term rental management.

property manager House of Snaps Operation Locations
House of Snaps portfolio locations

The House of Snaps Journey

House of Snaps has carved out an impressive path since its modest beginnings in 2013. What started as a small joint venture quickly transformed into a diversified property investment powerhouse. In the early years, the company experienced steady growth, acquiring its first two properties by 2014. However, 2015 brought a significant challenge when they ran out of funds. This obstacle tested their strategic resilience and planning capabilities, ultimately making them stronger.

By 2016, House of Snaps had rebounded, showcasing their adaptability by investing in off-plan buy-to-let properties in Nashville, USA. They further demonstrated their commitment to diversification by subdividing plots for new construction projects. The following years saw continued expansion, with the company entering the UK market for refurbishments and extensions for long-term rentals. In 2019, they ventured into the short-term rental market with properties in Margate, UK, marking a strategic shift towards maximizing rental yields.

From 2018 onwards, House of Snaps reached several significant milestones. Strategic cash-out refinance activities for short-term rentals in Northumberland, UK, and new projects in Florida, USA, and the Cotswolds, UK, underscored their growth. By 2023, they had initiated new build developments in Brighton, UK, further solidifying their market presence. 

The Strategy Behind House of Snaps: Buy, Refurb, Refinance, Rent

buy-to-rent model in short-term rentals
A snapshot of House of Snaps portfolio properties

House of Snaps has honed a strategic approach that is both simple and effective: Buy, Refurb, Refinance, Rent. This methodology is the cornerstone of their success, enabling them to maximize property values and rental yields systematically. Each phase of this strategy is meticulously executed to ensure the highest returns.

Adding Value Through Strategic Enhancements

Their process begins with the purchase of properties that offer significant potential for value addition. The refurbishment phase is where their expertise shines. Through careful renovations and strategic extensions, they enhance the living space, often splitting rooms to add extra bedrooms, which increases rental income. Commercial to residential conversions are another key tactic, transforming underutilized spaces into profitable residential units.

House of Snaps also excels in new construction projects, creating modern, high-demand properties from the ground up. They navigate the complexities of planning permissions and legal title changes or lease extensions, ensuring that every property meets legal requirements and maximizes its potential. This comprehensive approach not only increases the property’s market value but also boosts its appeal to renters.

Maximizing Yields with Short-Term Rentals

A significant part of their strategy involves leveraging short-term rentals (STR) to maximize yields. By converting properties into holiday lets or other short-term accommodations, they capitalize on higher nightly rates compared to long-term rentals. This approach requires meticulous management and marketing, but the returns are substantially higher, making it a lucrative component of their portfolio.

House of Snaps’ strategy of adding value at every stage, from acquisition to rental, exemplifies their commitment to excellence and profitability. By continuously enhancing their properties and strategically refinancing to reinvest in new opportunities, they maintain a robust and growing portfolio. This model not only ensures steady cash flow but also positions them for sustained growth in the competitive property market.

A Real-World Example: Financial Breakdown of a Holiday Let Conversion

House of Snaps provided a detailed example to illustrate their Buy-Refurb-Refinance-Rent (BRRRR) strategy, focusing on the financial performance and projections for converting a 1-bedroom apartment into a holiday let. 

This case study offers a granular look at the costs, profits, and strategic maneuvers involved in such an investment. It serves as a comprehensive blueprint for evaluating the feasibility and profitability of converting a property into a holiday let. It offers invaluable insights into the intricate financial planning and strategic execution that drive success in the property investment sector.

Development Phase (4 Months)

Development to Holiday Let 1 bedroom apartment

The initial phase involves acquiring and developing the property. Key financial markers during this phase include:

  • Gross Development Value (GDV): The estimated final market value of the property post-development is pegged at £235,000. This figure represents the anticipated sale price if the property were to be sold immediately after the renovation.
  • Site Purchase Price: The initial cost to acquire the property stands at £125,000. This purchase is the foundational investment upon which all subsequent value additions are built.
  • Construction Costs, Professional Fees, SDLT (Stamp Duty Land Tax): The total expenditure on construction, professional services, and taxes amounts to £76,000. These costs cover everything from architectural fees to legal expenses and construction materials.
  • Gross Margin / Value-Add: After accounting for all development expenses, the project yields a gross profit of £34,000. This margin, representing 17% of the GDV, highlights the immediate financial gain from the development effort.

Cash-out Refinance Phase (2 Months)

Development to Holiday Let 1 bedroom apartment finished

Following the successful development, House of Snaps moves into the refinancing phase to optimize their capital structure:

  • Cash Injection from 75% Loan to Value Mortgage: By securing a mortgage equivalent to 75% of the property’s new value, they inject £176,000 into their finances. This process is known as cash-out refinancing, where the increased property value allows for borrowing against the equity built during development.
  • Remaining Cash Left in Property: After refinancing, £26,000 remains invested in the property. This residual amount reflects the retained equity that continues to contribute to the overall financial health of the portfolio.

Holiday Let / Short-term Rental Annual Profit and Loss (P&L)

Short-term Rental Annual Profit and Loss House of Snaps

The final phase involves operationalizing the property as a short-term rental, generating ongoing revenue:

  • Gross Revenue: With an average nightly rate of £185 and an occupancy rate of 72%, the property generates an annual income of £46,000. This figure underscores the earning potential of well-located short-term rentals.
  • Cleaning, VAT & OTA (Online Travel Agent) Fees: Operating expenses related to cleaning services, value-added tax (VAT), and fees for platforms like Airbnb or Booking.com total £12,000 per year. These costs are essential for maintaining high standards and visibility.
  • Insurance, Maintenance, Bills: Regular expenses for insurance, property maintenance, and utilities amount to £4,000 annually. These recurring costs ensure the property remains in good condition and fully operational.
  • Mortgage Costs: Annual mortgage payments are calculated at £14,000, assuming an 8% interest rate on a commercial mortgage. This cost is a significant part of the financial planning and impacts the overall profitability.
  • Gross Annual Profit: After deducting all operational expenses, the net annual profit stands at £16,000. This profit reflects the effective management and financial planning that underpin the BRRRR strategy.

How It Might Be Useful to You

This detailed breakdown is more than just numbers; it’s a practical guide for property managers and investors:

  1. Investment Planning: Understanding the financial implications of converting a property into a holiday let aids in making informed decisions about initial investments, potential returns, and strategic planning.
  2. Cost Management: Knowing the specific costs associated with development and ongoing operations helps in efficient budgeting and financial forecasting.
  3. Profitability Assessment: Breaking down gross revenue and expenses provides a clear picture of the profit margins, aiding in the evaluation of the investment’s financial viability.
  4. Financing Strategy: The cash-out refinance phase demonstrates how leveraging property value through mortgages can free up capital for further investments while retaining equity.
  5. Operational Insights: Detailed knowledge of operational costs (cleaning, fees, maintenance) enables optimization of expenses, improving overall profitability.

House of Snaps’ Learnings Along the Way

Here are some of their key learnings that have shaped Simon and Laura Napper’s approach and can provide invaluable insights for aspiring property managers and investors.

You Do Need Money

One of the most fundamental lessons is that having access to capital is crucial. Whether it’s personal savings, loans from financial institutions, or investments from partners, money is the lifeblood of property development. The Nappers learned early on that having a robust financial base allows for more agility and opportunity when making purchases, renovations, and expansions.

The First Purchase Is Always the Hardest

Breaking into the property market can be daunting. Simon and Laura recall their first property purchase as the most challenging due to the uncertainties and high stakes involved. However, this initial hurdle is also the most transformative, providing critical experience and setting the stage for future investments. It teaches resilience and the importance of thorough research and preparation.

Good Debt Is Good

Understanding the difference between good debt and bad debt is essential. Good debt, such as mortgages used for property investments that appreciate in value and generate rental income, can be a powerful tool for growth. By leveraging good debt, the Nappers were able to expand their portfolio significantly, illustrating how strategic borrowing can enhance financial stability and growth potential.

Collaboration and Partnership Are Powerful

Collaboration has been a cornerstone of House of Snaps’ success. Partnering with other professionals—whether architects, contractors, financial advisors, or other investors—can amplify resources, knowledge, and opportunities. These partnerships bring diverse expertise and perspectives to the table, leading to better decision-making and innovative solutions.

Always Be Learning

The Nappers emphasize the importance of continuous learning. The property market is dynamic, with constant changes in regulations, market trends, and economic conditions. Staying informed through courses, industry conferences, and professional networks ensures that you remain competitive and adaptable. This commitment to learning fosters innovation and keeps strategies current and effective.

Systemize Your Processes

Efficiency is vital in property management. Simon and Laura advocate for systemizing processes wherever possible, from tenant management to maintenance scheduling and financial planning. Implementing standardized procedures and utilizing technology to automate tasks can reduce errors, save time, and improve overall operational efficiency.

Uncertain Times Are Good Times to Buy

Contrary to conventional wisdom, uncertain times often present the best opportunities for property investment. Economic downturns or market fluctuations can lead to lower property prices and less competition. The Nappers found that being prepared to act during these periods allowed them to acquire valuable assets at discounted rates, setting the foundation for future gains.

Add Value at All Points

Every stage of the property lifecycle offers an opportunity to add value. Whether through renovations, extensions, legal adjustments, or strategic marketing, maximizing the potential of each property increases its revenue-generating capability and overall market value. This principle is at the heart of the BRRRR strategy and has been pivotal in House of Snaps’ success.

Keep Taking Action

Finally, Simon and Laura highlight the importance of continuous action. The property market rewards those who are proactive and persistent. Every project, regardless of its scale, contributes to experience and growth. Keeping momentum, even through challenges, ensures progress and opens doors to new opportunities.

Conclusion

The journey of House of Snaps, characterized by these learnings, offers a roadmap for aspiring property managers and investors. By understanding the importance of financial readiness, the value of partnerships, the necessity of continuous learning, and the power of systematic processes, one can navigate the complexities of property investment with greater confidence and success.

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