How to FUND your HMO Project!

You’ve heard the phrase ‘ Money Talks’ no doubt. But if all yours has ever said to you is ‘Goodbye I’m off’ then you’ll know that making money from property is not as easy as it looks!

Funding your project is often the hardest part of the system unless you know what you’re doing! If you’ve FOUND a great property but have no money to buy it or develop it. you are well and truly STUCK.

Here are some of my top tips for ensuring that you DON’T GET STUCK without money when you are investing in HMOs…

1) Your money mindset is the most important part of the process.
If you believe, trust and TAKE ACTION, you can raise as much money as you want to. I know this may seem a little airy fairy, but trust me, I have worked with many people who say that the difference between being wealthy and being broke is what is between your ears! Not what you can do, your background or your education. It is purely how you THINK and ACT that makes the difference.

2) Create a clear budget for what you need.
Purchase Price – £140,000
Refurb costs – £50,000
Legals – £700
Stamp Duty – £4,500
TOTAL = £195,250
It looks like a lot of money doesn’t it? But how about if you break it down and challenge yourself to raise each part, bit by bit? (In reality most of this will come from your investor but it’s a great challenge to get lots of little pieces and put them together).

3) Do the maths on the project
How many rooms will you create: 6
How much will the monthly rent be on average per room: £600
Total Annual Rent: £43,200
With those figures you can work out the Return on Investment for your investor, your yield and the possible re-valuation at the end. It’s not an exact science as there will be voids, maintenance and so on. The key thing is to understand the maths behind it, so that you can give your investor some rough ideas as to their return.

4) Create a compelling reason why your investor should work with you
This might be because of your personality, your work experience, or your relationship with them. It is very rarely just about property investing experience or money.


5) Network and learn continually.
You are always pitching, whether you realise it or not. Your social media, your emails, your meetings and your networking say a TON about who you are. Make it great and make it memorable. People will fall at your feet to lend you money!

Multilet Income Multiplier Event
If you are dribbling to know more(!) I am leading my VERY last Multilet Income Multiplier event next weekend – 17th and 18th November at Crewe Hall in Cheshire. It is a fabulous hotel, and I’m even gonna take you out for dinner on Saturday night!
The event will cover everything you need to know to set up, scale and systemise your HMO business and is the very last one I will be running. As this is my last event, I am offering a very special rate for the last few seats I have available.
Just £499 plus vat for your ticket to this amazing weekend experience.
If you would like to know more, please click here https://goo.gl/6kERgs for full course details and information about what will be covered on the two day event.

The Information I Gather…

I’d like to share the pieces of information I gather when doing due diligence on a new area:

  • The local population number (you want it to be no less than around 80,000)
  • The mix of local employers (are there a couple of larger employers taking more than 100 new people on per annum)?
  • The mixture of properties available  – a mixture is important for steady rental demand
  • The demand for rooms (look at Spareroom as a guide – but notice the low quality of many of them)
  • The price of property versus the rental income
  • The public transport system and connections
  • The connections to the wider region in terms of jobs, transport and partnerships

All these are important factors when deciding where to invest.If you can nail down these facts, and demonstrate a strong demand for high quality rooms, in a place where there are good opportunities, and connections, you may have found your perfect investment area!

Are there other factors that you think I’ve missed?

Did I mention that I got into the last 100 for the Great British Bake Off 2018?

The experience reminded me that when you’re trying to create 6 cakes that are identical, you need a clear recipe to follow and a very logical approach. If not you get a terrible mess!

My recipe for success is simple. It’s five steps that are easy to remember:

Find It
Fund It
Finish It
Fill It
Future Proof It

Follow this and you won’t go wrong!

Finding the Right Location for your HMO

Finding the right location for your HMO might take some time but if you want to create an HMO that cashflows for many years to come, your due diligence now is worth it.  This is the first step in the process and the MOST important. Identifying your ideal investment area will also allow you to grow your portfolio quickly as you test and refine your model with a relatively small set of variables.  This will eventually save you time and money and allow you to create a ‘cookie-cutter’ approach as we have done in our company and repeat the same steps faster and more efficiently each time.

Initially you will need to choose your ‘macro’ location. This is the town or city where you are going to make a professional HMO work for you. In terms of an area where the most successful professional HMOs are located, there are some key characteristics you need to look for, which are namely:

  • A population of NO LESS than 80,000 people – otherwise you are unlikely to have the right number and supply of houses.
  • Robust and various transport links to the wider region (train, coach, bus, motorway, tram etc).
  • Within 20 miles of another equally large conurbation.
  • At least 20 medium to large employers (3000 people plus) who have a significant need for skilled or semi-skilled labour.
  • Local plans for growth, regeneration and investment (this is not always easy to uncover but looking at the local plan will ascertain local trends for housing and employment. Knowing the priorities of your local council for development over the next five years is a core part of understanding the viability of a potential HMO).
  • Retail and shopping facilities that cater for all segments of the population.
  • At least 10-15% of property in the rental market (i.e. predictable and steady rental market). This is true of most of the UK at present! This factor is important as it influences your tenants’ ability to move up and out of your HMO eventually. Some may leave due to job changes, others will purchase their own property and many will move into a single let property. If there is limited opportunity to move up the rental ladder this will affect the popularity of the area with regard to HMO room lets. Also having a strong local rental demand will ensure there are plenty of lettings agents locally who you can work with to let out rooms.

So as you can see, choosing the right location to invest in is critical if you’re to make the most of your money and investment, doing all you can to get a good return. After all, that’s why you’re in business, isn’t it?

Dressing a Room

As an additional sales tool when showing potential tenants around your HMO, the room ideally needs to be dressed. By dressing a room I mean ensuring that it is displayed to its fullest effect so that potential tenants can imagine themselves actually living there, sleeping there and making this their home. This means making the bed with a duvet and cushions, and possibly a throw. Are the pictures straight, the bin empty, the windows clean? Is the living room tidy, cushions plumped and curtains drawn? Turn all the lights on and consider replacing the low energy lights with higher wattage ones for the viewing. Close all the doors and drawers to the furniture. If the room has a slight smell (either from the previous inhabitant or as a result of being new) stick a plug-in air freshener into one of the sockets. Before the viewing you will also need to arrive early to check all the communal areas and tidy up anything which looks obviously off-putting.

Keep it Simple!

The number one rule for HMO interior design is to keep it simple! Ideally you will have decided on the colour scheme a long time beforehand, as you will need to tell the decorator the colours for walls and woodwork and any special requirements you have. Remember to consider the long-term implications for your colour scheme. Colours that are fashionable now might not be in a few years’ time. In which case have you budgeted for redecorating costs? Minor scuffs and marks will appear after even a couple of months so keep a detailed record of which colours were used first-time round and where, so that paintwork can be touched-up when needed. Although neutral colours may seem bland, remember that you will need to touch-up the paintwork regularly to keep it fresh and clean so having a simple, neutral colour scheme will make it much easier. Matt paint for walls and gloss or sheen-based such as eggshell for woodwork and doors works well. Try and use anti-mould paint in the kitchen and bathroom or anywhere that might be exposed to dampness.

Connected Tenants

Like water, tenants expect broadband to be on tap and in full flow 24 hours a day! Sign up for the highest quality broadband service in your area. Even if it’s slightly more expensive, having unlimited superfast broadband will not only attract tenants but will help keep them too. Order it early as it can take a few weeks for the delivery of the router, and the line to be activated. Choose a suitable location for a shelf where the router can be placed and kept safe from tampering. Unless there is already a power socket nearby, have one fitted. Once fitted, use a Speedchecker App to test that the download and upload speeds are in accordance with the speeds advertised.

The Green Deal

The Green Deal helps landlords and tenants by allowing them to make energy saving improvements to their rental property without having to pay all the costs up front.

These improvements can lead to warmer homes and reduced energy bills over time.

For further information contact: Energy Saving Advice Service (England and Wales) on 0300 123 1234 or Home Energy Scotland on 0808 808 2282.

Alternatively, visit www.gov.uk/greendeal

Heating, Lighting and Power

When creating an HMO from scratch, ensure that each bedroom has adequate heating, lighting and power sockets.

We install at least 3 double sockets per room and if light from the window is poor, we will fit an extra light fitting on a wall or ceiling above an area where a desk might be placed.