The 5 Most Common Mistakes Made by HMO Landlords

Wendy Whittaker-Large

  1. Not Understanding Your Tenant Type 

Understanding what your tenants need and want is crucial if you are going to consistently and regularly rent your rooms.  Many tenants move into an HMO for reasons of convenience – they like the benefits of an all-inclusive rent (particularly professional tenants), regular cleaning, and of course superfast broadband. Professional or working tenants might be moving into the area to take up a new job role. They may be earning a basic income, or living away from home. In which case finding cost-effective and convenient accommodation which is also easy to rent is top of their priorities. HMOs provide an affordable and social form of accommodation, which avoids the hassle of organising utilities. However, communication, management and understanding what your tenants need is also key to ensuring low voids.

2. Non- Compliance with HMO Regulations

Did you know that there are over 170 pieces of regulation and legislation when it comes to managing property, including HMOs! These cover all aspects of property management including licensing regulations, landlord and tenant legalities, money management, building regulations and planning permission. Being compliant with the government’s and local council’s requirements is vital, as failure in any area could result in a heavy penalty. If you’re not sure what you should be doing, the first place to check is your Local Council housing standards team. They can advise you on licensing rules, room sizes, and fire & safety features that you will need to install.

Another consideration is whether your HMO will require planning consent. Article 4 directions (Town and Country Planning) can require planning permission to change a property from a C3 class which is a single household dwelling to a C4 class, which is what most mandatory HMOs and additional licensable HMOs would fall under. Any HMO occupied by more than 6 people will be in a class of its own, also known as Sui Generis. If you’re a first-time HMO landlord, having experts at hand who know the regulations and local council’s specific requirements, is a huge benefit and extremely reassuring. 

3. Property Maintenance

HMOs require a higher level of maintenance than a single buy-to-let because there are more people living there and using the facilities on a daily basis. In addition, because the responsibility for almost everything falls to the landlord, even cleaning communal areas and changing light bulbs and smoke alarm batteries becomes a headache. Having regular proactive checks is crucial as  poor maintenance procedures can cost you dearly, especially if it leads to a penalty through non-compliance. A few tips to help you manage your properties more effectively:

  1. Use a suited keylock system that gives you a masterkey and sub keys. This will save you huge amounts of time managing keys
  2. Install a small key lock box outside the property – somewhere discreet. This will allow trusted tradesmen to enter on receipt of the code rather than having to meet you there in person
  3. If you are bombarded with calls from tenants, set up an out-of-hours answering service who can take your calls and send you a text and email. 
  4. Note down all the maintenance issues that crop up. In future you can use this as a tool to predict certain issues that regularly occur and take action to reduce them. 

4. Doing Everything Yourself

Many landlords believe that they can deal with HMO standards, find tenants and carry out repairs themselves. This can lead to an unmanageable amount of work. Well-run and well-maintained HMOs have good teams in place to be able to deal with everything. For a landlord who is looking for passive income and financial freedom from their property investments, working hard to keep on top of everything means that this is not the dream they originally set their sights on. Developing a power team around you who can help with the practical side of the business is critical to ensure you work on and not just in your business. 

5. Not Using an Agent

Many property investors start out with a dream of having a portfolio that will make them money and give them more time. With HMOs, there are so many specialist areas of management that you can find that self-managing your portfolio is just not worth it. In these cases, enlisting the services of a specialist HMO letting agent is almost certainly the best option. With experience and knowledge they can advertise, tenant and maintain your shared house more effectively and efficiently than you. A good agent will have a team already on hand, complete with the necessary advertising platforms, tenant application process and checks, a 24/7 phone and maintenance reporting service, and cleaning companies. They are required to know the law around rent arrears and evictions and can advise you about what to do if your tenant gets into difficulties. Overall it makes sense for you to hand the hardest and most intense part of investing to a company who knows what it is doing, leaving you to do what you love!

Learn to run your business as a business and it will pay you well!

For more information about HMOs and how to make money from just a handful of properties please go to www.hmosuccess.co.uk


Coronavirus and your HMO and the economic outlook – a summary

This piece is taken from my Youtube video which you can watch here – https://www.youtube.com/watch?v=a9QFmQC9dtk&t=49s

Coronavirus and your HMO and the economic outlook – a summary
There is no crystal ball in property. All we can do is educate ourselves and learn how to read the signs. Financial education will help you understand what is the best course of action for you to take for your circumstances at this time. 

Being an experienced investor (I’ve been investing for over 23 years) has shown me two things

1) People always need homes

2) There are always opportunities to serve others and make money
Financial education will help you protect yourself, your tenants, your properties and your business. It will also help you make wise decisions. There are some key economic factors that we as investors need to understand

  • Inflation
  • Interest rates
  • Debt and borrowing ratios
  • Cashflow
  • Spending

These apply to nations, business and property. National income and turnover is called GDP – Gross Domestic Product. The current biggest threat to our GDP right now is Coronavirus. Tax receipts will go down, and spending will go up – leading to more borrowing. Will this lead to higher inflation? What will that mean to us as investors?

3) Only 34% of the UK’s income is from tax receipts. That means that spending, leverage and borrowing are fuelling the economy. Tax receipts will go down and spending will go up due to Coronavirus. Equally the government has borrowed huge amounts of money to get us through this time, leading, inevitably to higher inflation (eventually). 

Over time, this will affect you if you are a borrower or have leveraged your property with debt because inflation erodes debt. It also causes prices to rise and house prices to increase. This could be good news for investors. However, if the government raises interest rates to slow the rate of inflation, there will be an impact on mortgages. Monthly rates will go up and reduce cashflow. 

4) House prices are more linked to money supply than demand. 

  • The government has recently started a further round of Quantitative Easing recently which has added another £500bn to the money supply. What will this do to inflation in the long run? If this money starts to circulate (as it should) then inflation will be the result. This will result in higher house prices and capital growth. 

5) What does this mean if you invest in HMOs?

Use a cashflow forecast to create a tight handle on your income and expenditure.

Keep a tight control of your finances. 

Communicate with your tenants regularly to ensure cashflow – they still need a home, and you need an income. Create a compromise on rents so that you can both get what you need. 

Now is the time to plan and learn so that when the opportunity arises you are ready to pounce!

6) Keep up to date with advice and information from the government. Set aside a few minutes per day to understand what the advice means for you. Reduce overwhelm by addressing your immediate issues and then blocking out time to look at the stuff that’s important but less urgent. 

7) Making Decisions during Coronavirus

Make decisions calmly and on a risk-based scenario (impact and likelihood)

Analyse how you are making decisions (fear based or information –based)

Sound out any particularly big decisions with a friend, business colleague, mentor or trusted individual.

Create a Plan B should the worst happen

Set time aside every day or other day to stand back and analyse key performance metrics (income/ expenditure/ room sales/ rental income/ arrears).

Don’t bury your head in the sand! Reach out if you need further help. 

8) Should I carry on with my HMO purchase?

If you are currently buying, consider renegotiating price or delaying purchase

Worth keeping any finance deals on the table as they could be harder to get later

Soon there will be some great deals

Work with investors as savers are losers

If you are currently buying – take a RISK BASED APPROACH – do the maths on the deal 

Keep an eye on auctions

Otherwise wait


9) Your Own Health and Wellbeing as an Investor

Look after yourself and your family

Take action and use tools to run your business properly

Make sensible decisions

Be responsible, not selfish

Be patient and have faith

If all else fails – remember, this too will pass

Creating a Pipeline of Deals

There are plenty of places to find deals, and creating a sourcing pipeline needn’t be difficult. You do need to be organised and have a structure in place to ensure that you maximise your chances of success. To find great properties and great deals you need four things

1.       Process

2.       Perception

3.       Paperwork

4.       Persistence


Without a process you won’t be able to create a steady stream of potential property deal. Without perception you could uncover a wealth of amazing properties but not know what to do with them. Without paperwork you can’t finalise the deal. Without persistence you can’t grow wealthy. As you can see, only two of these are practical actions – the other two are personal attributes. Finding deals needs you to be practical and personal.

1.       Process. Ideally you want to design a campaign. This gives your activity definition and purpose and allows you to learn each time from your mistakes and successes. I would recommend that you design a 4 week campaign, in which you agree to target a particular area of no more than 1.5 square miles.

·        Using a map, define the area you are going to target and find the postcodes that are part of this location. This will be the HMO location that you’ve already pinpointed. Now locate all the shops, post offices, takeaways and supermarkets that serve that location.

·        Next, you want to get some leaflets designed that tell people about you and how you can help them. We use www.smartpropertyleaflets.com who provide ready-made templates ideal for leaflet campaigns of this type. One thing to remember: you will want to repeat your campaign up to seven times before you see steady results. Order enough leaflets at the start to ensure you have enough volume to repeat your campaign regularly.

·        Find a reputable leaflet delivery service. There are many ways you can achieve this – one is by working with a local takeaway service who are already delivering leaflets in the area. Another is by hiring independent leaflet distributors. Make sure you have a way of spot-testing the coverage of the drop.

·        Write out a number of simple postcards that you can put up in shop windows locally. A suggested wording would be:

   ‘Struggling to sell your house? Do you need to move fast? I am looking for a house to buy and might be able to help you. Please get in touch to see if I can help you call Wendy on xxxxxxx’. A simple postcard with a call to action is the best way to get your message out there.

·        The third aspect of your campaign is direct-to-landlord letters. You can download a sample letter from the website www.centreround.co.uk. The letter needs to be direct, friendly and polite. It needs to state what benefit you can offer to a landlord and how you can help them. One piece of advice: persistence is the key. I regularly receive letters from well-meaning investors who have found my details online and are offering to help me rent or sell my properties. I always wait until I’ve had a second letter before I respond. The sad thing is, I’ve rarely had that second letter. Remember that landlords who may be ready to sell, want to know you are committed. One letter is not a sign of commitment.

·        Another great tip is to incentivise your recipients in some way to meet with you. I mentored a female partnership who had no money to invest and were looking for a rent-to-rent deal to get started. I suggested that to stand out from the crowd, that in their letter they offered to meet up with the landlord and pay for a coffee. As a surprise incentive, even if the landlord was not willing to meet in person this time, I suggested that they include a voucher for a free coffee. As a result they had a number of calls from investors, one which led to a profitable rent-to-rent deal making them over £800 profit per month. Be different.

·        Your campaign should also include contacting all the people like estate agents that you’ve already started to engage with, and should include networking like crazy.

·        Plan your diary so that you can give yourself deadlines and structure. You don’t need to complete all your actions in week one.

·        After you’ve completed the four weeks, spend some time analysing what went well and what didn’t. It takes time and experience to execute a great campaign. Now you need to wait for your seeds to flourish, plan the next campaign and follow-up any leads you have generated.

2. Perception. Perception gives you insight into the possible motivations of a seller so that you can delve into the real reasons for a fast and efficient sale. This is a vital skill as it means you can cut to the chase and start negotiating on terms that are meaningful to you both. Perceiving what will work is a core skill when negotiating with people, and if you rush into the details of an offer too quickly you may miss important details.

However, educating yourself about the various strategies available to secure property is also a must. Without education I would have overlooked many potential deals that crossed my desk. It’s by understanding what makes a deal work that you will be ahead of the crowd, and you’ll be able to work with vendors, agents, local people and your contacts with confidence and insight. Knowing how to adopt the right strategies in particular situations, coupled with understanding people, will allow you to find and negotiate great deals.

Knowing the different approaches for securing property deals will allow you to have a number of strategies to use in addition to the usual route of traditional buying. This will give you confidence to negotiate deals. It will also bring you a streak of creativity when it comes to funding. Many sellers are not necessarily looking for cash. Although their property is up for sale, and it apparently looks as if a purchase transaction is what’s required, many vendors have reasons they HAVE to dispose of the property even though selling is the least beneficial to them. They don’t know what you know and therefore choose go to an estate agent to sell the house. They simply don’t realise that other strategies are possible. It’s your job to work with them and use your knowledge to help them too.

Other vendors are desperate to sell and need a fast transaction. So in an environment where sellers want SPEED and CERTAINTY, how can you work with that? Unless you understand the process for executing a deal fast, you won’t be able to meet the needs of a seller and you will most likely lose out on a possible deal.

In the negotiation for a deal, then, perception and awareness is key. If you struggle with this, here are some tips to help you:

·        Put the vendor first. Make sure you listen more than you talk, and hear more than you speak.

·        Create rapport by asking pertinent and meaningful questions. Watch the person to see how they react to you, and whether they are nervous, shy or wary. Are they a dominant person, a decisive person or an impatient person? Take some time to find out a bit about them but be aware of their motivation. Don’t prod too far immediately, or spend too long on meaningless chatter. There is a maxim in psychology which is ‘pace, pace, pace, lead’. In other words, let the other person set the pace while you set the structure. Then you can mould the interaction and lead the discussion.

·        Have a list of questions already prepared, but sense when it’s time to stop. There are facts you’ll need to gather to assess whether you can form a deal or not. Some people want to get to the point of the offer immediately and others are assessing you to see if they even want to do a deal. Don’t rush into making an offer or saying something you’ll later regret. If you sense that the other person wants to rush you (which is common if they’re motivated to sell) just explain – ‘So that I can make you the best offer, I just need to go away and crunch the numbers. I’m sure you’d rather I got this right than messed you around?’. Most people will say yes to that.

·        After any interaction with someone spend some time reflecting on what you learnt. What did you observe? What were the give-away clues about the motivation of the vendor? What conclusions could you draw about whether a deal is possible on a personal basis? Did you rush the discussion? How were you feeling throughout?

·        It is impossible to predict the outcome of a discussion at this point. Stay calm and positive, and press on with your next steps.

3. Paperwork.

Having the right structure to do the deal once you’ve found a motivated vendor is vital. Before starting any paperwork, you need to gather some core pieces of information from a vendor (seller). These pieces of information are best gathered face to face. Your leaflets and postcards and letters will generate interest and phonecalls. You need to be prepared to take some basic information on the phone. However, the idea is that by meeting in person you can create far more rapport and trust and have much greater chance of creating a deal for you both. The aim is a win-win situation.

Without the following pieces of information you won’t be able to come up with a succinct, clear and precise plan that benefits you both. The core pieces of information to gather are:

  • Address and details of the property and the vendor
  • How long the vendor has owned the house/ property
  • How quickly the vendor needs to / wants to sell
  • What the reasons for the sale are (divorce, downsizing, moving abroad, pay off debt etc)
  • Why the property isn’t up for sale already with an estate agent
  • Are other people to be involved in the decision (partner, parent, siblings etc)?
  • Is there any debt on the property (mortgage, second charge, bridging finance)?
  • If there’s a mortgage, how much is it, what type is it and what’s the remaining term
  • Has a purchase of another property already been agreed?
  • Would the vendor be prepared to let out the property rather than sell it?
  • Has the vendor got plans for the money from the sale?

Once you have these core pieces of information you can then go away and crunch your numbers and come up with a suitable offer. There might be a number of different possibilities so be sure to present them clearly and slowly. Chances are your vendor has never heard of some of them, and was awaiting a simple purchase price offer. They will be pretty mystified when you start to talk about lease options, rent-to-rent and delayed completion if you’re not careful about avoiding jargon. Your communication skills in presenting a deal will be paramount to whether the offer is accepted or not. Practice your delivery with someone who can give you fair feedback if you are unsure of your ability to be clear.

Once you’ve had a successful meeting, you’ve come up with a plan, and an agreed way to proceed, it is vital that this is captured in a Heads of Terms Agreement. This simply lays out the roles and responsibilities that the partners in the agreement will take. This needs to be signed and each partner should have a copy. The Heads of Terms Agreement then forms the basis for your legal documentation. I always advise people to take legal advice on any deal. However, it’s worth bearing in mind that many general property solicitors are not well-versed in creative deal strategies. You may have to refer your specialists to your vendor in order for the deal to proceed.

4. Persistence. Sourcing an attractive deal takes patience and determination. It takes time to set up the pipeline, and time to negotiate with the vendor. It may take a few weeks before you see results from your persistence. You may get a few phonecalls that lead nowhere. You may feel like you’re wasting your time and money. However, in property, like investing generally, persistence pays off. Don’t let your early failures or lack of progress set you back.

After a number of months being seen and heard in our local area, telling people what we were doing and what I was looking for, I hadn’t seen much progress. I began to wonder whether it was worth all the effort and time I was putting in. I was sitting at my desk one day when I received a phonecall from a man who didn’t want to pay for an estate agent to sell his house. The house was a great size and in a good location for an HMO. I was first in the queue! By being known in my local area, I had a distinct advantage when it came to buying or negotiating a deal. He and his wife wanted to downsize, having raised their family in this spacious terraced property. However, the house needed some work to make it attractive to a family buyer – cash he didn’t have. I was able to sit down with him and work out exactly what he needed to move on, and how we could benefit too by creating a win-win solution that worked for us both. He was delighted to save the money that otherwise he would have spent with an agent, leaving him more to put towards a smaller house. In this situation, knowing the strategies that can be used in property deals is paramount, as a simple purchase transaction is only one of many that can be employed to buy and secure property.

So remember Edison’s famous words when you’re tired and feel like you’re getting nowhere, and when you’ve had little results from your efforts:

‘Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time’ ―Thomas Edison

Saturation, Supply and Shifting Sands

If anyone tells you that the laws of supply and demand don’t apply to property, be very careful to analyse their motivation! Whilst property prices are much more linked to the supply of mortgage lending rather than the supply of properties, when it comes to rental availability there is a clear correlation between supply and demand.  In any market place, where there is an over-supply of product there will be an impact on the strategies used to sell that product. This might result in lowered prices, or better deals, or an improvement in quality. HMO rooms are no exception to this rule. If you are investing in HMOs you might have seen some changes to local supply. The fact is that in some areas of the UK there are more rooms than demand at present, and landlords are struggling to fill their HMOs. Why is this?

  1. The first reason is that investors have realised that the only way to maximise their portfolio income has been to invest in HMOs a) to counteract the pernicious new tax laws that are being introduced b) to benefit from higher monthly cashflow c) to leverage commercial finance and d) to protect against potential voids. With access to better information, training and support, more and more investors are recognising the power of HMOs for long term wealth and immediate profits.
  2. Secondly, the introduction of stamp duty on second properties over the price of £40,000 has meant that smaller, single buy to let properties are proportionately more expensive to buy. Coupled with the minimum mortgage or purchase price requirement from lenders where investors are investing via a limited company has lessened the appetite for cheaper properties, and increased the need for a higher return linked to a higher purchase price. HMOs make the perfect foil to these prerequisites.
  3. Brexit and immigration. Certain parts of the UK have already felt the negative effects of Brexit, with many Eastern Europeans migrating back to their home countries. According to Migration Watch UK ‘Although we have seen a fall in net migration of EU8 citizens there have been continued increases in immigration from Romania and Bulgaria, so it is too early to say what effect the referendum result has had on long-term international migration’. In other parts of the UK there is a growing immigrant population. Predictions are that immigration will stay steady in terms of net figures, but that certain immigrant communities may change substantially in terms of culture and mix.
  4. Student housing impacts. In many traditional University towns, an enterprising landlord could make a good living from students renting rooms in the locality. Recently there has been an explosion of high quality, contemporary purpose-built student accommodation wiping out the demand for individual HMO housing, necessitating a shift in market offering from landlords still wanting a profitable return. In many instances, they have adapted and upgraded their HMOs to attract the professional market, and this has in turn impacted the current professional HMO stock.  

These factors have created excess provision in some areas especially where investors have failed to understand the forces at work in the local economy and the necessity to adapt and change to the marketplace. So what can an investor do who is facing competition and wants to resist the lure of price reductions just to fill rooms?

  1. Ensure that you are creating a product that not only offers great value but also has a niche offering. Whether you offer personal service with a smile, have wonderfully designed interiors, or make HMOs great communities, you need to identify what it is you are good at and tell your market place about it. In this day and age, unique and niche brands get people talking and sharing, and your HMO business is no exception.
  2. Tell everyone what you do. Use social media like Instagram, Facebook and Pinterest to share your message and learn how to create advertising copy that sells your rooms (linked to the ideas above).
  3. Work with local businesses and estate agents to create win-win referral deals that benefit them too. Incentivise your tenants to give you referrals and ensure you get plenty of feedback that you either act upon or share!
  4. Respond fast and flexibly. If you cannot respond to a viewing or request quickly, in a competitive market place you will probably wait much longer to fill your rooms.
  5. If you are unsure about consistent supply of tenants, always have a plan B. What else might you do with an HMO that you just can’t fill? Might this present another opportunity that you have missed?

The ebb and flow of supply and demand in HMO rooms is constantly shifting. As investors we not only have to adapt to survive but also to thrive. In this changing landscape of rooms and provision, the creative, savvy and determined investor has the edge. Make sure you’re one of them!

 

52 Week Video Series – Week 5 – The Four Ps!

Do you REALLY know how to make customers return to you time and again? What are the four Ps that make them use YOUR services/ and business more than anyone else’s?

 

 

 

I look forward to hearing how you get on increasing your business by using these four Ps!

Why mentoring makes a difference

When I first started out in my property journey (over 20 years ago) I went to speak to a friend’s husband who had 5 student multi-lets to find out exactly how he had created this small but effective portfolio. I copied his model, learned how to raise finance from the bank before BTL mortgages were created, and studied tenant and landlord law to develop my knowledge and application. With Alan’s guidance and support, I began to make good profits from my very first student multi-let property, and I didn’t look back.

Over the years I have had other mentors – business, personal, HMO specialists – all people who have done what I wanted to do but didn’t know HOW to do it. In the past, I have also worked with a personal trainer and a spiritual advisor to help me grow and develop as a person and to this day still implement the practices I learnt with them.  Often I chose people that I wanted to work with because I could see that they had done something against the backdrop of challenges which I too was facing. My personal trainer for example, also had a young family, so could understand the difficulties of fitting exercise around a busy lifestyle. She also understood the problems of feeding a family when they want to eat egg and chips and you want to nourish yourself with avocado and feta salad.

If you need to find someone who is right to mentor you, it helps if you have an understanding of where you are now, and also what’s stopping you. You may have identified a goal that you want to achieve but you aren’t sure HOW to achieve it. You may look at others who are successfully running businesses, creating passive income or building property portfolios but just not know where to start. This confusion leads to you chasing your tail. It leads to indecision, procrastination and defeat. How do you avoid this trap? You need to find someone who has already demonstrated a PATTERN of success, that you can simply copy and paste. Also, someone who you can relate to and who has themselves proven that despite life’s challenges, they have achieved success.

The benefits to you in finding someone who has already done this are multifarious:

1) Not wasting time on U-turns and dead ends looking for answers that someone else has already discovered

2) You can build a business based on tried and tested principals and practice

3) Utilising someone else’s mistakes from which you can grow

4) Improving on the ideas you glean from another person’s implementation

5) Finding short cuts and faster routes to delivery (i.e. NOT reinventing the wheel)!

6) Staying accountable to your goals

7) Regularly measuring your progress

8) Having someone who’s on your side with whom you can confidentially share your worries, concerns and questions

9) Having your ‘blind spots’ illuminated and your ‘starshine’ magnified

10) Saving thousands of pounds and hours of time in non-personalised and irrelevant learning which doesn’t take account of YOUR situation, strengths, position and goals.

The question is – WHO do you need? And WHAT are you trying to achieve? THEN you can find someone who has done it successfully, COPY their systems and processes, and PASTE them into your life, with help and support tied in to ENSURE your SUCCESS! The only question is WILL YOU?!

Nike, Adidas or Puma -does your brand really matter when it comes to HMO rooms?

footwearBelieve it or not, what you do, how you do it, what you say and how you say it says a LOT about YOU. And that applies to properties and HMOs too. If you’re not convinced, let me share how your BRAND speaks volumes to your customer.

Let’s say you are a prospective tenant called Paul, a working young professional, perhaps starting a new graduate trainee scheme in a new area. You don’t want to rent a flat with all the encumbrances of bills and direct debits. You just want to pay one price for fully-inclusive rent. Simples! The answer is of course to rent a room in an HMO – a shared property where you have a private bedroom and possibly ensuite, but shared kitchen and outside areas. You will have to take on some of the responsibilities of emptying bins, locking up and cleaning your own room, but if you haven’t mastered those things by the time you’re 21 what use is good parenting or a University education??

So, you are quite prepared to take the ups with the downs of communal living, and you start searching on Spare Room (self-proclaimed number one website for house shares in the UK). There are a number of vacancies in the area you’re searching and you’re pleased with the choice. As you start to examine the photos and the descriptions of the properties, you notice some stark differences between the adverts. Some have great photos of lovely rooms, presented well and with detailed descriptions of what’s in the all-inclusive price. Others look frankly neglected – a mattress with obvious stains and an unmade bed; mismatching furniture, and blurry photos taken on a dated phone camera after the cameraman had had one too many lunchtime pints at his local. You’re reaction is ‘Yuk, who would want to rent THAT room?’

Two very different offerings and two very different brands. Probably two very different landlords and two very different sets of tenants. Not necessarily two different sets of profit figures though, which might surprise you.  There is a market for both. At the lower end of the market there is a need, a great need, for cheap, simple and basic accommodation. True, the tenants you attract may also be described as such, but as long as they pay on time and look after the place, are you bothered?

On the other hand, you might want to corner the local market for more up-scale, trendy rooms which demand a higher price tag but can also demand a more discerning and, ahem, a more demanding clientele. In this case, Paul has a choice. He can choose to pay more for a more luxurious room, but in his mind he might also be wondering, ‘Will the landlord be a pain, checking up on me all the time? Will the other tenants be high maintenance and always complaining about stuff?’. Paul then wonders about the other room. It’s certainly cheaper and less salubrious, but it probably means he can get on with his life without any hassle. On the other hand, if there’s a leaking tap, how likely is it that this landlord will be bothered to fix it?

As Paul ponders these questions, I want to put some questions to you, dear HMO investor. You see, the way you or your agency interfaces with tenants also says a lot about your core values – are you traditional (old fashioned some might say) and do everything with paper (remember that stuff that comes from trees)? Are you highly geeky and use all the latest apps and online tools but find that an actual conversation with a person is quite stressful? Maybe you are the next and upcoming editor of HMO Vogue and know your pantone colours from your RAL codes (paint codes for the colour ignorant).  Your HMOs are beautiful inside and out, but you have to rent an additional warehouse for all the arty additions displayed in your photos and you are VERY protective of your designer wallpaper.

What about communication? How do tenants contact you? Will you accept a text at all hours of the day or night? Or is it by telephone only during office hours? When a tenant moves in, what kind of impression do you create? Do you carry out an induction, explaining how everything works and the ground rules, or are you more laid back, letting know that the key is under the doormat, please keep the fridge clean, and we’ll see you in 6 months?

Each aspect of your business builds your brand – so examine WHAT you do and HOW you do it. You are conveying a message with everything you do. In marketing, professionals use the three Ms – Media, Message and Mode – and these can be directly applied to property too.

What Media are you using to communicate with your customers what does this say about you? What is the Message you are trying to convey (a better question is what emotion are you trying to elicit so that the tenant will rent your room and stay) and what Mode of communication are you using – and which modes do your tenants prefer?

The three Ms can be applied to all aspects of your business, none more so than in your interactions with the outside world – your market. For them, like Paul, they are assessing those three Ms subconsciously to be convinced that you have exactly the right room in the right house, and that they will be the right tenant paying the right price.