So you’re thinking of investing in property, or you already are investing in property but want to see better returns? At Brentor Property Group we specialise in helping people like you invest in high cash flowing property strategies successfully.
Let’s start with the basics (bear with us). A HMO is a House of Multiple Occupation, which is property simply rented out on a room by room basis to 3 or more unrelated people who share some common facilities.
You may also have heard them called “multi-lets”, “shared accommodation”, “house shares” or “co-living spaces”.
Why it works:
Much higher ROI than your average BTL
Single transaction purchase - In many ways, the same as a BTL
It’s affordable for people - compared to whole house dwelling
Things to look out for:
Void periods between tenants
It can be more difficult to get lending
More tenants, more management
Legislation, Licensing, Planning and Building Regulations
This is the first point because it’s the most important point! HMO’s are subject to many regulations and you must be comfortable with them before you take the plunge. This varies on the area (is Article 4 in place), the size of the HMO (less than 5 occupants, 5-7 occupants or 7+ occupants), Licensing restrictions in your area, Planning and Building Regulations in your area). These are also subject to change (just to keep us on our toes!).
Educate yourself and make sure you know your stuff! Or invest with someone who does!
Don’t Underestimate the Refurbishment of the Property
It can be easy to get carried away and make a deal stack and convince yourself that things are going to cost less than they actually do. However, as you have seen, you are subject to certain regulations as a HMO landlord and things like fire doors and interlink fire alarms come at a price. If you’re not sure where to start with these, get a builder in with HMO experience to walk you through the refurb and provide a detailed quote.
Top Tip - Always make sure you have a healthy contingency in your budget and work with contractors who understand and have HMO experience.
Get a Watertight System in Place to Manage your Budget and Track Costs
This can be something as simple as a spreadsheet, an app based CRM system or something like Xero to log your receipts. Whatever works for you, go with it, but don’t let costs slip through the net and escalate.
Top tip - Diarise updating your chosen system weekly to make sure you don’t put it off.
Engage with the HMO Officer Early
Make friends! The earlier you engage with them, even before you start work, the more they will appreciate it and the less chance you have of coming unstuck further into your project. If you don’t involve them until the last minute, they might get suspicious that you don’t know what you’re doing.
Management, Power Team and Automations
Once you’re up and running and your tenants have check into their amazing new rooms, you need to make sure that your property remains compliant. This includes regular cleaning, inspections, checking fire alarms etc. Don’t make the mistake of trying to do everything yourself. Write a list of regular tasks that can be outsourced such as painting, electrical works, cleaning, gardening, tenant check in/out, tenancy agreements and other admin tasks. There is some excellent software available to support you with management and upkeep of your properties so consider making the investment and automating some of the above to enable you to free up your time to focus on your next deal and improve your tenant experience.
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