This week we would like to share our 6 top tips for investing in HMOs. For first time investors who are investing in HMOs, advice and knowledge is essential. However, even the most experienced property investors make huge, costly mistakes as they have overlooked some fundamental points of due diligence.
At Sourcesome, we abide by these 6 top tips when viewing HMO deals for our investors. Let’s start to breakdown these down:
1 – Know your investment area.
Any property investor needs to know the area in which they are investing in like the back of their hand. Investment and market landscape can change massively in the same town, even from street to street. For example, an investment strategy which works well in one area of a town or city may not work as well 1 mile down the road. It is essential to be up to date with local trends, supply and demand as well as any restrictions or legislation.
2 – Understand the strategy and know your exit plan.
You will need to make sure that you understand your chosen strategy. There is plenty of training out there which covers all property strategies. You may also want to work alongside someone who has been through that process previously and can guide you along the way.
Simply knowing your primary strategy is not enough; you must also have a suitable 2nd exit strategy in case your circumstances change.
3 – Run the numbers and then rerun them.
We would advise that you double-check your calculations, use local knowledge, such as the council’s website, to ensure your figures are accurate.
4 – Speak to the experts and use their knowledge.
Build your power team and speak to local estate agents to get a feel for what is going on in your area. HMO Managers are a must for any HMO – do not rely on letting agents as they do not have the same experience as a dedicated HMO manager!
5 – Become familiar with the legislation and your responsibilities.
Many property investors have been fined for failing to adhere to their responsibilities as a landlord. The most common reason for this happening is they admit to not knowing or understanding the legislation and their requirements.
Breaching your responsibility as a landlord could result in losses of tens of thousands of pounds in legal fees. Examples of this are often in the news, so beware!
There are hundreds of pieces of legislation that property investors and landlords need to know and understand. On top of this, there are local rules and regulations that you must follow.
Room sizes are a common issue we see other property investors trip up all too much on. Check your local council’s HMO guidelines as they want your HMO to be up to standard.
6 – Target your tenants and stand out
Understanding precisely what your tenants are looking for is so important. Talk to local HMO managers to discover what these are.
You need to make sure your property is the top choice for your target tenants. If there is a high level of competition in your marketplace, make sure your rooms stand out.