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HMO Bootcamp
HMO Bootcamp
HMO Bootcamp
HMO Bootcamp
There's loads of areas that work for HMOs if you do your research right, you do your correct due
diligence, and you follow the steps in this program, the HMO Bootcamp. So if you're thinking,
man, I'm stuck. How do I even get started? How do I choose an area? How do I find the goldmine
magic city? Just remember that there is none, and I'm going to be going through with you a whole
bunch of steps that you're going to need to do, due diligence, research, to finding out where the
right city or the right town is for you. And when you can find your area, your patch, so to speak,
it's almost like half the battle's done for you. One of the things that stops a lot of people
buying HMOs is they're so hung up about the right area. So in this part of the online HMO Bootcamp,
we're going to be talking about how to find the right area for you. So if you're looking for
HMO Bootcamp, we're going to be talking about how to find the right area for you. So in this part of
the online HMO Bootcamp, we're going to find your goldmine area.
So if you're looking for HMO Bootcamp, we're going to be talking about how to find the right area .
1 hour Rule
When deciding where your HMO patch is going to be, the first thing I'm going to say is
start close to home. Now, I'm not suggesting that you can't invest in properties that are
far away from home. However, if you've got somewhere half an hour away, that's a really
good patch, but there's also somewhere that's seven hours away, that's a really good patch,
it would probably make more sense to buy a HMO in the area that's half an hour away.
Anyway, it's easy to jump on the bandwagon and follow what everybody else is doing because
you've heard of these great cities that seem to be working well to think that you have to use that
as your HMO patch. But actually, sometimes some of the hidden areas, the closer areas to home
that other people might not be aware of, it might not be on their radar, is going to work
potentially a lot better for you. Now, I always say it doesn't matter if the properties are close
and there's a problem with one of my properties, it doesn't matter if it's in Scotland, Wales,
Ireland, or England, because I'm not going to be the person managing the problem anyway. However,
saying that, when you're looking to build up your portfolio, you're going to have to go and view the
property, you're going to have to go and make connections in the area. If the patch that you've
chosen is seven hour round trip away, well, that means that every time you go there in the early
days, it's going to take you seven hours of your life, and time is money. Another advantage,
to being close to home is you're going to probably know the area better, you're going to know things
like the reputation, you're going to understand what the crime rate is, you're going to have links
there already. So I would suggest that you start thinking right now of all the towns and cities
that are within an hour's drive from your house. That's the first step before we choose your
goldmine area. So what I want to do right now is I want you to just write down a list of all the
towns and cities that are within an hour's drive from your house.
houses of multiple occupancy, only work in areas where there are people, where there are jobs and
shops and opportunities. Because if you try and rent a house out room by room in the middle of
a field with three hour walk away from the nearest anything to get milk, it's probably not going to
rent out very easily. So you want a city or a town that I call is buzzing. It's got to be buzzing.
There's got to be some energy to it. There needs to be things, hospital maybe, universities,
colleges, train stations, retail parks, shopping centres, facilities. Now, if there isn't any of
that, then I want to tell you right now, the area is not going to work. People say it has to be a
city, not a town. It doesn't matter if it's a city or a town or even a village. What matters
is that it's buzzing with people and jobs and opportunities. There are some cities, I mean,
there's a city called St. David's. It's the smallest city in the UK. And believe me, it's very
small. And the chances of renting out rooms there are going to be quite, quite difficult. Whereas
there are towns which are bigger than cities. So it's all about, you've now written down a list of
all the towns and cities within one hour commute to your house. Next question is, which ones are
the popular ones? Which ones are the popular ones? Which ones are the popular ones? Which ones
are
the shopping ones? The busy ones? Now, it doesn't matter if they're popular in terms of they have a
nice luxury feel to them. They're expensive. Not at all. What matters is that there's people there.
People say, Samuel, does it have to have a hospital? Does it have to have a university?
Does it have to have? And the answer is, it doesn't have to have anything. But if it doesn't
have any of those types of things, it's not going to work. So does it have a hospital, a university,
a train station, a shopping centre? Does it have retail parks? Does it have jobs?
Is it busy? When you walk down the high street on a Saturday, is it swarming with people? Or is
it absolutely dead, really, really quiet, like a ghost town? And if it's the latter, this isn't
going to work. So what I want you to do right now is I want you to just look at the cities and
towns that you've written down and identify which ones are the ones that are buzzing with people.
Go.
and rental prices in an area. And this is particularly the case when you're dealing
with HMO properties. And that's why I said in the last video, you want to buy in low areas,
cheaper areas. Let me give you an example. Right now, as I'm filming this, I'm in Beaconsfield,
in one of my houses in Beaconsfield. And in Beaconsfield, it's just a small town. The room
rentals in this town are around about 550 pounds per month. So to rent a room in Beaconsfield,
you're talking about 550 pounds a month. However, the house prices on average are probably
around
about two or three million pounds. So you have to buy a house for two or three million pounds
to then rent the rooms out for about 550 pounds. If you travel just 15 minutes down the road
to Beaconsfield, you're going to have to rent a room for about 250 pounds. So you're going to
have to rent a room for about 250 pounds. So you're going to have to rent a room for about 550
pounds.
To High Wycombe, the house prices are way cheaper in High Wycombe. Way cheaper. They're still
quite
expensive, but they're a lot, lot cheaper. You might be talking about 750,000 pounds to buy a
house. So are the rents a third of the value? No, in fact, quite the opposite. The rents in
High Wycombe are a lot cheaper. So if you're thinking of where to buy a property as a HMO,
what I would suggest is if it's a buzzing area, you want to find areas where you can get them as
cheap as possible. Because there's no direct correlation between the house price and the
house rent. This is the same in lots and lots of places. This is not just Beaconsfield to High
Wycombe. You can do this in lots of different areas. If you go to the Midlands, you can say,
you might get around about 600 pounds for a room rental, which is ironic because in Beaconsfield,
you get less. Yet in Birmingham, the average house might be about 200,000 pounds. And the room
rents
are about 600 pounds. You go to Stoke-on-Trent, which is just 45 minutes to an hour away from
Birmingham, the rents aren't that much different, but the house prices are almost half again.
are pretty consistent, which they are, a room will rent out on average between about 350 to 550
pounds per month. That's the going rate of rooms just generally across the UK. So if that's the
going rate generally across the UK, but the value of houses in some cities are millions, and in
other cities are just 100,000 pounds, in order for you to get the best return on investment,
which is what this is all about, you need to be thinking in your mind, okay, well, if a room rents
this is about, this is about investing in HMOs, but not just buying HMOs and renting them out,
but getting the maximum profit, getting the maximum return on investment. You need to be
thinking, well, hold on, where could I buy, which is buzzing, which is ideally close to home, but
which is going to give me the best return as possible? Where can I buy low and rent high?
Don't get too tempted by going to different areas that are really, really far away from your house,
because I promise if you look high, you're going to get the best return on investment.
But if you look hard enough, within an hour or maybe two hours max, you can find some really,
really good areas where the return is really, really high. Now, if you want to break the one
hour rule and just say, you know what, forget this, I want to build up my portfolio in Liverpool,
or I want to build up my portfolio in Birmingham, that's not a problem. You can do that. If you
strategically want to grow your portfolio there, and in the early days, just visit every couple
of weeks, that's okay. But at least make sure that you are getting a good return on investment,
I'd rather you break the one hour rule than break the buzzing rule, because then you're going to end
up with no tenants, and or to break the cheap rule, because if you buy really expensive,
the return on investment is going to be really bad. So those are the three foundational things.
That's the explanation why there's no correlation between the house price or the house rent.
So with that in mind, I want you to start writing down three or four different places that you think
potentially tick those three boxes. And then we're going to go and do some further due diligence on
those areas. And if you suddenly realise my area is no good, just find another area. This isn't
something you need to be really sparing about. There's not only two or three good areas for HMOs
in the whole country, there's many. So write down three or three or four different possible areas
that come to mind. Hopefully, they'll be close to home. But if not, you can go a little bit further
out the field and cheat a little bit, write them down. And then let's start doing some further
So we'll go to spareroom.co.uk.
to rent in Warsaw.
They'll think 100 pound a week must mean 400 pound a month.
It's amazing how many people are looking for single rooms
before.
That people are looking to pay for rooms is about 450 pound.
Because if there's only a little bit of demand, you might go, oh, wow, 120 people looking in Warsaw.
That's great.
But if there's 1,000 rooms available, then suddenly it's not so great.
Now, the formula that I like to use, because there's 120 people looking for rooms.
There's 120 people that are advertising themselves as looking for rooms.
But most people that are looking for rooms just go straight to rooms wanted.
Take a picture of yourself and tell people what you're looking for?
So you can't really compare the ratio between rooms available and people looking for rooms.
The typical ratio that I say is if there's three times as much rooms available than there are people
looking,
that's when I'm going to begin to think, oh, my goodness, maybe the supply and demand ratio is not
great.
But if there's 100 people looking for a room and there's 200 rooms available,
I'm not worried because I know there's probably more than 100 people actually looking for a room.
So as long as I can make my rooms the best and charge a competitive, affordable price,
when you're buying a HMO property, if the property has five or more tenants in it,
you're going to need a HMO license. And if there's less than five tenants, it will not need
a HMO license. So before you start buying properties or viewing properties, you need to
check the licensing rules. And how do you do that? Well, you do that on Google. So let's have a
little look and I'll show you exactly what you need to do. So we're just going to type in,
do I need a HMO license? And right at the very top, it comes up GovUK. So we're going to click
on this. And then quite simply, we're just going to type in the postcode of the area that we're
looking at. So if you're looking at Central Walsall, you're going to type in a Central
And then it's going to give you housing multiple occupant patient license. And this is from the
Walsall Council. And you can literally do this with any area in the whole of the country. And
it tells you right here whether you need a license or not. Very, very simply. And HMOs are
probably rented out by at least three people who are not from the same household. Fine. And when
do you need a license? You must have a license. If you're renting out a large HMO in England or
Wales, your property is defined as a large HMO. So if you're renting out a large HMO in England,
if all of the following apply. So all of the followings here need to apply. It's rented to
five or more people. Some or all tenants share a toilet, bathroom or kitchen. At least one tenant
pays rent. So that is the very standard rules. That's what the Walsall Council have said. So now
we know what the Walsall Council have said in that area. So we can say great, the rules are normal.
If it says something different, like you need a license, even if there's only three tenants in,
in mind when you're continuing searching for your area. But that's a really important check
that you need to check before continuing to do due diligence on your area.
prices are quite cheap, it's buzzing, it's close to home, and you think it seems like
a good area, my suggestion would be to see if you can look to buy just on the outskirts
of the Article 4.
demand for rooms, however, Article 4 is all over Nottingham, and I've got some of my students
that buy just outside, in the little areas outside of Nottingham, which actually still
have good demand for rooms, they've got their own little shopping centres going on, close
It might be that you can't do this, there might be so much Article 4, and if you go
Planning Permissions
Next, if you're looking to buy a property and turn it into a HMO and it's in an Article 4 area,
you might say, well, can't I just buy it and then get planning permission and worry about
the planning later? And my answer to that would be probably not. If you're really good at planning
permission and you're an expert and you're experienced in it and you feel confident buying
properties in an Article 4 area and then getting planning permission, then fine, good luck to you.
However, generally speaking, I wouldn't advise doing that because there are heavy restrictions
and the council, frankly, don't want you to turn any more properties into HMOs. So getting
planning permission is probably going to be a little bit difficult. If you do want to go down
that route, my advice to you would be to speak to the council, speak to them, ask to speak to the
planning department and have a conversation and say, look, I'm thinking of buying a property and
turning it into a HMO. I know that there's Article 4 direction in the area.
If I was to buy a property and convert it into a HMO, what would be the likelihood that I'd be
able to apply for planning and be accepted and have the conversation and see what they say?
However, generally speaking, as I said, I probably would just leave it and move to another area if
is you can find properties that are currently already running as HMOs.
This is brilliant because it means that they're already going to have the grandfather rights,
So the way to do this is you just find properties that are advertised as existing HMOs.
because if they've already got planning permission and they're already a HMO,
there's no harm in having a look and see how much properties are selling for that are existing HMOs.
If you're wanting to just put money into good HMO properties that are existing,
If you haven't, go back and go over the whole thing again until you have your patch.
Right now, chapter two is the point where you're now going to start viewing properties.
You're going to start finding properties, and hopefully we're going to get you that perfect HMO
property.
Does it need to be a massive, big property with a big garden and a drive?
No, not necessarily.
You see, when I started out in property, my first house was a HMO,
and I thought that a HMO needed to be a massive, big, detached property with a garden
because there was lots of tenants and a big drive with five spaces.
a lot of them will think you're talking that kind of a big, licensed HMO.
So if you rent out a little, small house, and you rent it out room by room,
and if you rent out the two rooms and then one of the reception rooms you turn into a bedroom,
guess what?
You've got yourself a HMO.
Some people will call it a minimo, or others will just call it a multilet, but it's still a HMO.
You'll need a license, generally speaking, but check with the council,
You'll need planning permission if there's seven or more people in the property,
So what are we going to do right now? Well, I'm going to take you through all the different types of
multilets or HMOs that you could potentially want to find,
and I'm going to go to random areas and show you how I use Rightmove to find my perfect multilet
properties.
and that's this. If you want to turn a two-bed property into a four-bed property,
all you need to do is you need to go onto Rightmove, and you need to find two-bed properties,
so that you can use in any area. And the great thing about, let's do this in Warsaw,
the great thing about two-bed properties is they're quite cheap, because it's just a two-bed
property. So let's look in Warsaw. We're going to look from houses between 70 grand up to 120
grand.
Now, houses, two-bed, max, and let's see what we've got. Now, I've not done this before. I
don't know what's coming. I've already seen one property here, which is a two-bed in Warsaw.
Offers over £110,000. Now, this property, let's look at the floor plan. This is where you need to
get a little bit creative. So this property would be a little bit difficult, just because of the
layout. So you've got two big bedrooms here, and the way that you do this is you convert every room
into a bedroom. Because if the bedrooms are 100 squared feet each, you don't actually need a
bedroom. So that would be a room, that would be a room, and you can see these are 12 x 9 x 11 x 5,
so they're way bigger than 100 squared feet. And not having a communal area is not that bad,
because we're so antisocial in this generation. People don't even really like communal areas that
much anymore. Over the last 11 years of me having HMOs, I've found that when I, my first HMO,
people loved the communal area. But now, my HMOs, the communal areas just sit there empty,
particular tenant will just take over the communal area. So if we did that as a room, that as a room,
that as a room, that as a room, it would work perfectly. They're all big. The only thing is
they are not the right layout because if that was a bedroom and this is the front door,
you're going to have to walk through the bedroom to get to the kitchen, which isn't going to work.
So the only way you could do it, and this is how you need to think a little bit creatively,
is you could put a corridor wall, a studded wall here and here, and that would suddenly mean that
this was a room. What about this room? Well, you could potentially keep the studded wall going
and put the studded wall across here and here, and then this would be your little downstairs
landing area. So that could work. However, if you did that with all that corridor space,
the rooms might be on the small side, so it'd be a little bit of,
stretch, but very possible. So you could potentially get four rooms, four bedrooms out of this house.
And the house is only on for 110,000 pounds. Let's see how close it is to the city centre. It's
really close. In fact, I've got one of my students who's got a property on Moat Road,
which rents out like a dream. So it's a really good location, 0.6 miles from the Warsaw train station.
So this property could potentially work. Let's see if we've got anything else.
So same story, we've got two massive bedrooms. We've got two big rooms here. This one would be
potentially a little bit more difficult again, because you need a corridor here and you need
a corridor there. So this is going to be a little bit more difficult. So this is going to be a little
bit more difficult. So this one might not work. Let's see what else we've got. Okay.
All right, so this one, now this one is looking interesting, because you can see here there's a
little, there's a little gateway, which could mean I'll show you if we can look at the floor plan.
Okay, so we've got again, two big bedrooms. So that will be a bedroom,
bathroom upstairs, bathroom downstairs as well, which is awesome. hallway, this is more like it.
So you if you if one of your bedrooms is upstairs, you're just going to go through the front door
up the stairs, you don't have to walk for anybody's room, you're just gonna go up the stairs and
you're
gonna go into your bedroom. Well, you're gonna walk up the stairs and you're gonna have these,
this new landing. And then you're gonna if you've if you're in that bedroom, you're gonna go into
that bedroom, that bedroom, you're gonna go to that bedroom, what happens to that bedroom?
dishes,
happens if this is your bedroom, or if this is your bedroom, you're going to go through that door.
And if this is your bedroom, this is what I was talking about, you're going to be able to go
down the gateway, and you can have a backdoor key. So you're literally just going to go,
and then into this room. Now, as it happens, that actually might not work because this room
is also a kitchen diner. But that's how you need to start thinking. You need to start thinking
creatively. You need to start thinking, could I move a wall? Moving a stood wall is not a massive
deal. Could they walk around the back? How could we turn a two bedroom house into a four bed
HMO?
And it's very, very possible. As long as the rooms are 100 squared feet, it is very, very possible.
Let's see what else we got. Okay, this house doesn't have a floor plan. If it doesn't have
a floor plan, it can be really difficult because you can see the rooms, you can see everything's
good size.
But if you haven't got a floor plan, you don't know where the rooms are located. So it can be
really difficult to know how to configure a conversion of a two bed to a four bed. So really,
you do need a floor plan in order to give you an idea if it's going to work.
Again, if you're going to do this one, you've got your upstairs is fine. But downstairs,
you're going to need to put a corridor in here. And you need to put a corridor here and here.
So that they can say you always need to think if you need to look at each individual room and think
if you were the tenant of that room only, how would you get in through a front door or a back
door? How would you access the house? And how would you be able to get to your room without
disturbing anybody else? That is the question. All right, let's look at this one. So this one
Looks nice, good condition. Fantastic. But let's look at the floor plan. It doesn't have a floor
plan. No good. Next. So you just got to be a little bit laborious with this. Don't get super excited
about one particular house. Okay, this one, two bed house. It's very bare. Could this be a four
bed mortuette? You got your bedroom, your bedroom, you need to make sure there's 100 square
feet
looks like they probably are. You've got two toilets. Fantastic.
You've got you're going to walk in the hallway, you've got a room. See, this room is perfect,
because that door you're going to close off. So so so this and you're going to put a door instead
in the kitchen. So you're going to move that door to here. And assuming that you could do that,
this person has got it made. They're going to come in through the front door room number one,
they're going to have access to the kitchen, which is shared, you can maybe even put a little
en suite here maybe. So that they're sorted. This person, you're going to struggle to get to that
room. The only way you could do it is if you get to that room through the back. Let's see if you can
do that by looking at the picture. You probably can. There we go. Use this door here the back door.
So if your bedroom number two, you're going to come through the back, there you go, there's the
porch. You can see it, which is porch. So you're going to come through this and that's going to be
Because the whole of the last chapter of the beginning of this was knowing your area, knowing
where the Article 4 is, knowing the streets that the HMO management companies say, there it works
and there it doesn't.
So you know the area already and you're only finding properties specifically in the area that you
know has got demand to rent out rooms.
Now, I typically, you might have heard me say on YouTube that there's a 15 minute rule.
And the 15 minute rule says that you should be able to get to the centre of where you're buying.
So if the areas say Coventry, you should be able to get to Coventry city centre where the shops are
and the train station is within 15 minutes without.
You can't take this to every single town and city in the UK because some towns and cities in the UK,
this wouldn't be applicable because 15 minutes is too far.
Like Middlesbrough, it's got to be within a 10 minute walk.
Otherwise, 15 minutes away, even by walk can be just in some rough estates and no one wants to
rent rooms there.
So it really depends on what the HMO management companies, the investors, spare room, the
market is actually telling you.
So I'm going to teach you a little ninja hack in terms of areas so that you're only looking at properties
specifically in the areas that you've worked out of good.
And on this little map, there'll be it will circle around everything which is considered to be Coventry.
Now, everything that's considered to be Coventry might not be a good area because even though if
we go on spare room and we type in Coventry.
New today.
So people looking to pay £550 for a single room, £550 for a double room.
So great.
But does that mean that they'll be looking for a room right here?
The truth is, without doing chapter one of this online course and speaking to the HMO management
companies, we won't know.
So if I could clear.
There we go.
Kersley.
Is a bit rough.
Maybe they say, all right, so let's stay within the M 69.
That's where all the, all the, all the, uh, the, the, the gangsters go.
Okay.
Okay.
All right.
Move.
And then we can view properties only in the area that we chose.
So then when we're searching on right move, every property we're looking at, we know is in a good
area.
So that way we're specifically only looking at the property itself to make sure that we can configure
the property, right?
We know that the area is safe.
And how you turn a three-bed property into a four-bed HMO, generally speaking, is you
Now when I see two reception rooms, I see one reception room and one bedroom.
If you've got three bedrooms and two reception rooms, all you've got to do is turn one of
the reception rooms into a bedroom, and then suddenly you've got four bedrooms.
If you've got a room that's currently being used as a sitting room, and there's a sofa
in it, you take the sofa out and you put a bed in it, and now it's a bedroom.
It pretty much is that simple.
Now, of course, you've got to potentially, if the layout's wrong, you might have to put
a corridor or a stood wall in it, you've got to have fire doors, but we'll get to all that
later.
But right now, we're looking for three-bed properties that we can run and use as a four-bed
HMO.
So how do we do that?
But renting out a property and breaking it down and renting out bit by bit is a very
And if you're on a different platform, you've got to use the same mindset to how you can
configure things.
So for sale, and we're going to search this time for three-bed, three beds.
And we'll just do three-bed only because we're looking specifically to turn a three-bed into
a four-bed.
Okay, now we're not going to search from highest price, let's search from lowest.
So, I mean, you might have seen me say, rule of thumb is to spend £30,000 per lettable
room.
That means if it's a five-bed HMO, or if it's a four-bed HMO, let's say, because we're
You're advanced.
You're advanced now.
So if you're doing advanced training, it's not about £30,000 per room or £35,000 per
room.
And later on, we're going to get to working out the return on investment on HMOs.
So right now, in Birmingham, if we search from lowest price, we're going to get a lot
So I think for a three-bed property in Birmingham, because I know Birmingham, and you should
So if you're looking at your patch, looking at the average prices and the average rents,
I'm thinking probably £130,000 is going to be about minimum right now in Birmingham.
So £130,000.
And of course, we're going to only be looking in areas that we know work.
Floorplan.
Oh, would you look at that?
So if you're looking...
If you're looking for a communal area, so this is a communal area with an open-plan kitchen
But as it happens, I know that King's Standing is actually just outside of the Article 4
zone.
So that's what I was talking about previously, about area, about potentially.
Does it work?
So this one, floor plan, and you've got bedroom, bedroom, bedroom.
Absolutely perfect.
So this, now as it happens...
11, 9 by 7, 4.
Now, it looks like the stairs, it looks like you go through the stairs from here.
So that is how...
And, I mean, you might pay a little bit extra money for it.
But that is how you turn a three-bed property into a four-bed multi-layer.
I'm going to ask you in your area, in your patch, you know the market's good.
I want you to find as many properties that are three-beds that you can potentially turn into four-beds
in your area.
Now, if there are none, if it's like, oh, there's no two-beds to do as four.
There's no three-beds.
But if you're just going through this and it's like, man, there's nothing, then maybe your patch just
hasn't got any properties.
Or maybe you need to just be really on it and continually looking for properties every single day.
So what I want you to do is I want you to go on Rightmove, maybe even go on Zoopla and the other
different platforms as well,
and find as many properties you can, three to four beds, write them all down, list them, and then go
to the next video.
Go.
Let's do Stoke.
Stoke-on-Trent.
Okay, four-bed.
Okay, students.
There actually isn't a floor plan, but it doesn't matter so much because we don't need to reconfigure
this one.
It's got a little, you can see it's got a little communal area here.
It's got a kitchen and the rooms are just like this.
There's a picture of room four, but it must be four bedrooms because we can see it.
10.
These are all big enough, but big enough, big enough, big enough.
Great.
So that is a straight forward, easy to find four-bed house that you're just going to rent out as a four-
bed multi-layer in Stoke-on-Trent.
And you can find these all day long in Stoke-on-Trent.
And the rents, I don't know how much they'll be, maybe £354 a month.
But that's really good return on investment for a house that's on for £1299.
See if there's any four-bed properties that you can rent out as a four-bed multi-layer.
List them.
Go.
if you've got two reception rooms, you see one reception room and one bedroom. However, if you've
got a four bed property, and there's two reception rooms, and you're going to turn one into a
bedroom, that means you've now got five bedrooms. If you've got five bedrooms, that means you
are
probably going to need a HMO license. Now having to have a HMO license is not the end of the
world,
might cost you around about 700 to 1000 pounds on average, it will last you five years. But it's a
little bit of a headache getting a license. There's a little bit of time involved, there's a little bit
of money involved. So is it worth getting one extra room for the sake of then having to have
a license and potentially having to spend more money getting it up to scratch. So sometimes you've
just got to make a commercial decision. Is it better to just rent it out to four people with
no license?
Or get one extra room in but then have to get a license and go through the expense and the hassle of
getting a license involved. So that's the decision that you're going to have to make. If it's your very
first HMO property, if it's your first multi-let, it might be worth just doing a four bed, trying it out,
testing it, seeing how it goes. And then if you think, oh my gosh, this really isn't working, I've bought
it in the wrong area, or I'm not liking this HMO lifestyle, you could always then have an exit strategy
and just rent it out.
So if you're going to rent it out as a normal single let, and it might still be giving you a decent return
on investment. But if you turn it into this big five bed HMO, put on suites in potentially, get a license,
you're committing to a lot, lot more. So the jump from four bed to five bed, you're only going to get
an extra few hundred pounds a month, but you've got a lot of extra hassle with getting a license
potentially. So that's a commercial decision that you need to weigh up if you want to do or not.
6 Bed Sweet Spot
Now, while I said that the jump between four and five, it's not that much extra in profit,
but you're then going to need a license. However, six bed, six bed's kind of the commercial sweet
spot. I don't love five bed HMOs because if it's a five bed HMO, I'm going to need to get a license,
maybe just stick with four. But six, you're going to have to get a license. The rules between five
and six are no different. You're not going to have to get any different type of planning or
different type of license. Generally speaking, across the board, it's the same. But six bedrooms
suddenly becomes very, very worth it in order to just get a license, to then have six people paying
you rent every single month for just one house, it's worth it. So how do you find a six bed HMO?
Well, it's just really simple. It's the same story. We can maybe look for five beds and then see if we
can just add on a reception room. Let's look in Stoke-on-Trent and we can do our whole area search
criteria.
As always, let's look for properties. If it's going to be a five bed, it's probably going to be at least
170 grand. Let's go up maximum of 300 because now we're talking a real big property. It's going to
give you a really, really good income. So houses, I'm going to see what we got. Okay, so we've got
this property here, six bed semi. Nice. This one here, six bed detached. Beautiful. 4.5 million
regeneration.
Project. Let's have a little look. So this is a very, very, very big house. Great condition. Look
at that. Wow. Formulas not feelings, Samuel. Formulas not feelings. Okay, this is already a HMO
and it's smack bang in the centre of Stoke-on-Trent. Look, you can see there's Hanley Park right
there.
So the location, I know Stoke actually a little bit and I can imagine that would rent out
there. Brilliant. Okay, and it's renting out currently between 28 and 30,000 pounds per year.
So this property, six bed, it will already have a license and everything. In fact,
it's already being rented out and it's generating 28 to 30 grand a year. Boom, straight away. So
that's going to give you a very nice return on investment. So you can sometimes, oh, look at
that. Okay, I'm getting really carried away now. Of course, I'd want a deal. I wouldn't want to
pay the full asking price, 299. How long has it been on for? It's been on for ages. So listen,
you can be really pernickety and think, I want the perfect property. And I know this is about
finding the perfect HMO, but to find the perfect HMO, here's the little secret of what you need
to do. You need to find all the potential HMOs, all the potentially perfect HMOs, and then you
need to just pick up the phone and go and view them. View the two to four beds, view the three
Even view the six sweet spot HMOs. Now when you get to seven beds, you're then going to need
planning permission to turn a property into a seven bed, unless it's already got planning
permission. This one's already a HMO. So existing HMOs can be okay too. So that's the general gist
of finding properties that are between two and six bed potential HMOs. So what do you think I'm
going to ask you to do right now? I'm asking you to go and find some six bed HMOs and write them
down and get ready to go. So that's the general gist of finding properties that are between two
and six bed HMOs. So that's the general gist of finding properties that are between two and six
bed HMOs. So that's the general gist of finding properties that are between two and six bed HMOs.
Filter Searches
Here's a little ninja trick that you can do when trying to search for properties. Now,
I didn't give you this right away, because it's important that you don't rely on it solely because
you could miss properties. But Rightmove have introduced a little search. So if we do a new
area, let's do crew. So they've introduced a little search bar. Now, let me show you how this
works. So if we do all of crew, in fact, because we're going to use the search bar, it doesn't
even matter. We'll do within 20 miles, 50 grand, 180 grand, two bedhouses, and boom.
This is the search bar that Rightmove have. Add keyword. Now, when you add that keyword,
you can put things in like two reception rooms. And then all the properties that come up,
it will show you, look, there's the matching word, two reception rooms.
So now we're looking at a two bed terrace house with two reception rooms. So it's a little cheat
that you can use, two reception rooms. Now, when it stops showing two reception rooms,
it will cross the word out. But all these properties of two reception rooms, it's absolutely
loads. Also, you don't just have to type in two reception rooms. You can type in other words. You
can type in HMO. And then all the existing or potential HMOs will come up. But not all of them,
So four bed townhouse, it's got the word HMO in it. And suddenly, this is like HMO galore.
You can just able to find bang, bang, bang, bang. Potential to be used as HMO,
subject to the gaining the right planning consents. Okay. So it's right next to a hospital.
Really good location. It does need planning by the looks of things. 180 grand in Newcastle.
So there's a little ninja trick. You can use words like HMO. You can use words like
Multi-let. All these types of things. Potential development. And it's going to give you potential
opportunities on right move using that fantastic ninja keyword search. So hopefully you'll be able
to use this. Go back to your search and see if you can pick up any gems that you missed the first
time around.
Advanced Software
Great. Now, I use a special piece of software called DealSourcer, and it's an online software.
Now, I do own shares in this company. I've also become a director of the company, so that's my
disclaimer. But it's absolutely frigging fantastic. And it's a way that what it does, this piece of
software, is it scrapes Rightmove, it scrapes Zoopla, it scrapes all the sites, and it finds
all of the potential HMOs in a particular area. So let me show you how this works, because you
might want to use this. So if you type in, well, you can literally do the whole of the country.
So it says that this doesn't just work for HMOs. This also works for negative equity leads,
retail opportunities, buy-to-let, all different types of deals. But if we click on HMO,
Let's type a particular area. So let's say London. HMO in London. So 228 deals found,
which are HMOs in London. It gives you the return on investment. It gives you how much
below market value it is, how many potential HMO bedrooms. So this is just a list in London
of every single HMO. It's just a brilliant piece of software. And the only reason I've
shared in it was because I was so amazed by it. And I've been using it for a long time.
So let's type in HMOs in Stoke-on-Trent. It was one of my students that created this called
Ashley Rudland. And yeah, any area. So this is a piece of software that I use all the time. Let's
type in Stoke-on-Trent. HMOs in Stoke-on-Trent. Five deals right now available in Stoke-on-Trent.
Boom, boom, boom, boom, boom. And there you go. There's the one that we found a minute ago.
And if you click on it, it gives you all of the details. You can see what the sold prices are.
You can see the demand and the growth. It works out the return on investment as a HMO for you.
So I couldn't not tell you about this piece of software. It's also used as an app. You can
download it. I've got this app on my phone. That is called Deal Sourcer, like this. And I will leave
a link to this app in the worksheet to this video. And I'm also going to give you a discount code so
you can get the app reduced. It works out, I think it's like 45 pounds a month. No, I'm not going to
say the prices. I'm also going to give you a discount code so you can get the app reduced.
I'm going to leave it in the worksheet so you can check it out, check out the pricing, check out how
it works. Highly recommended by me. And go take a look at that right now. See you in the next video.
Kitchen Guidelines
Some houses come with really tiny, tiny kitchens. This is probably not going to be appropriate for
a HMO property unless you can extend the kitchen somehow. So a HMO property, the kitchen, you
should have half a metre of workspace per tenant. So half a metre is probably what, like this per
tenant. So if there's five tenants, there should be two and a half metres of workspace in the
kitchen. Also, there should be four burners, there should be a grill, there should be an oven.
So you need to make sure that the kitchen is appropriate for a HMO property. Now, most kitchens,
generally speaking, are of that size. Most kitchens do have four burners, a grill and an
oven in them, generally speaking. If it's a really big HMO, like a six bed HMO, again, you need to
make sure the kitchen is appropriate for the property. There probably will be guidelines from
the council.
Specifically in the area, this is something to check for. But when you're first looking at
properties, just bear this in mind. Is the kitchen appropriate for a house share of this nature?
How do you know if you're going to be declined a license? These are all kind of questions that
will be probably freaking out anybody that's considering buying a HMO property. So the first
thing is, will you need a license? It's very, very easy to work out whether you need a license or not.
You can apply for a license online. So if you just go to the council website, and we're going to get
to the council website by just typing in, so Birmingham HMO license. So you're going to apply
for a license, and it will ask you some questions, and it will determine whether you actually need a
license or not. And as I say, every council website is a little different, which does make it confusing.
You can always phone up if you are confused. So apply for a HMO license. Now, apply for a HMO
Some details. So is the property rented privately? Well, it will be. So I'll say yes.
Is it occupied by five or more people? Well, let's say it's not. Let's say it's just going
to be a four-bed HMO, and you're confused as to whether you need a license or not.
Well, no. Do occupants compromise more than one household? Yes, because there's four.
Are the occupants sharing at least one basic amenity, such as kitchen, bathroom? Yes,
they are. They're sharing the kitchen, and they're sharing the bathroom.
All right. Let's see. And ... license not required. So you are not required a mandatory HMO
license in Birmingham based on those things. So that's the first thing as to whether you're going to
need one
or not. If you do need a license, then you might think, okay, well, how do I know that I'm going to
be granted a license or not? Now, this changes quite a lot. So I'm going to keep on saying this. If I
sound
sound like a broken record, then good. Every council is different. You need to contact the
council direct, tell them what kind of property you're thinking of buying and get guidance from
them because there's different types of licensing. There's mandatory licenses. There's also selective
licensing. There's additional licenses. It just depends on the area. If you buy a house in Wales
and rent it out, you need a license. Now, don't let license freak you out. Having a license isn't
necessarily a big deal. You can just apply for a license online a lot of the time, apply for it,
pay £100, boom, you have a license within no time. I had to fill out a little form, do a little test
to make sure that I was a reasonable landlord. Multiple choice test, you do it online. I can't
even remember how it worked. It cost me about £100 and boom, voila, I got a license to be a
landlord.
In Wales, HMO mandatory licenses, they're the most rigorous because you're actually going to
have somebody go out and inspect the property and look round. So if someone goes out and
inspects
the property and looks around it, what's going to determine them whether they're going to give you
a license or whether there's not? There's two things. Firstly, to get a HMO mandatory license,
you need to be someone who's not a criminal. If you're a criminal and you've got a background of
fraud, you might not be granted a license. Secondly, the property needs to be a property
that needs to be fit for purpose. Now, I'm going to give you some examples of things like this. Let
me show you just how much information there are online. So if we go Doncaster, HMO license,
I could honestly spend hours and hours and hours talking to you about licenses and all the
different areas, but Google needs to be your best friend. So look, all the information, do I need a
HMO license? This is for Doncaster. Do I need planning permission? Who's exempt from applying?
Everything is,
here. Criteria of an HMO. Criteria of an HMO. Let's have a look. Apply for a license so you
can see if you can get one or not. Planning permission, landlord's handbook. This is an
excellent little guide. The landlord handbook. Look at this. Look how many pages it is. All
about licensing and HMOs and your responsibilities, how to apply for a license, the types of
tenancies.
Everything's in here. This is the technical boring stuff that you can find on the council
websites. You're not going to learn on the council website on Google how to find a gold mine area
or how to speak to a state agent, how to secure good types of... You're not going to find that,
but you are going to find protection against infection. Brilliant. Awesome. But you need
this stuff, but you're just going to go direct to the council websites. Look, this is Liverpool
The guidance on standards and management of houses and occupations. So this is what the
requirements of a house need to get a license in Liverpool. So it goes through the basic
amenities, the shared facilities, and it will say things like the kitchen needs to have
half a metre of worktop per tenant in the property. So if there's five tenants in the
property, you're going to need half a metre of workspace on the kitchen, which basically
means if you've got a big HMO, you can't have a little tiny kitchen. You can't have a
big kitchen. It's kind of common sense. The bedrooms are going to need to be 70 squared
feet. 70 squared feet is just about big enough to have a small bed, a small wardrobe, and
a small chest of drawers compact in a little single room. That's about 70 squared foot.
If it was any less than that, it'd be kind of obvious to the normal person that this
isn't probably going to rent out as a room on its own right. If there's no communal room
and you're asking them to just stay in their bedrooms all the time and hang out in their
If it was any less than that, it'd be kind of obvious to the normal person that this is going to rent out
as a room on its own right. If there's no communal room and you're asking them to just stay in their
bedrooms all the time and hang out in their rooms, then they need to be 100 squared feet, which is
just a little bit bigger. Maybe that would fit a double bed, a chest of drawers and a wardrobe with a
little bit of floor space if it's not too tight to be able to pull out drawers and stuff. That's going to be
about 100 squared feet. So this is all here, kitchen facilities, water supply, lighting, ventilation,
crowding and space standards, fire precautions. It's all here and it breaks down in detail what type of
property is going to be fit for purpose. All the sizes, all the measurements, absolutely everything. So
it's going to be about 100 squared feet. So this is all here. Kitchen facilities, water supply, lighting,
ventilation, crowding and space standards, fire precautions. It's
going to be about 100 squared feet. So this is all here. Kitchen facilities, water supply, lighting,
ventilation, crowding and space standards, all the sizes, all the measurements, absolutely everything.
It's all going to be available from the council. Another thing is, you can even ask the council if you're
if you've seen the property and you like it, and you think this is going to make me money. This is the
Samuel Leeds kind of HMO and you put an offer on it's accepted and you're worried about whether
you're going to be declined a license. You can ring up the council and you can ask them to come and
visit the house.
and the things that you need to maybe do to it in order for it to get a license.
And if the council won't do that, normally they will come out for a small charge.
That's about the standard charge that those that don't come out for free.
And they'll come out and they'll look at the property for you.
So do that.
Figure out exactly what kind of licenses or license you need by speaking to the council.
Make sure the property is fit for purpose before you just buy it.
All the rules and the licensing stuff are online for free.
Now, in Liverpool, it might be slightly different, but generally speaking, the criteria is similar.
Refurbishment Requirements
Once you've found a property that looks really good and you've checked the licensing rules,
the next thing to check is how expensive is it going to be to turn this into a HMO? Now,
if it's just a normal refurb, or it might not need a refurb, it might be a perfectly good house in
perfectly good condition. But if you're going to turn it to a HMO, there are a few things that
you're going to have to do. Even if it's not going to have a license, you should still make sure the
house is safe. My general rule of thumb is to act like the house needs a license, even if it doesn't
need a license. So just speak to the council and say, if I was to buy a HMO in this area,
what would the house need to be fit for purpose in order to get a HMO license? And they're going
to give you the rules, the size of the kitchen, the size of the rooms, they're going to say it
needs to have these types of fire alarms, it needs to have fire doors. And I would personally
run a house,
even if it didn't need a license, even if it's just a four bed HMO, as if it needed a license.
And the reason I suggest that is because no one's going to check, no one's going to come out to the
house. But it means that you know that the house is completely safe. It's a really good property.
The only reason for licenses in the first place is not to say you can or you can't have a HMO,
it's to say you can, but it just needs to be up to a certain standard. The government and the
council, they're not trying to poo poo on HMO landlords, they're just trying to say,
they're just trying to separate the professional HMO landlords with the amateur cowboys. So I'm
in favour of licenses. And I run all of my HMOs as if they needed a licence even they don't need
a licence. So my point is when you're getting the quote, even if it's in really good condition, you
still gonna need fire doors, you still gonna probably need fire and smoke alarms, you still
gonna need things. You might need escape windows in the property to make sure that it's safe. So I
would get a builder to go to the property, tell the builder the standard that you want the HMO to
be to and get them to give you a rough quote. Now, of course, you haven't bought the property yet,
this is still early stages. But before you pay any money, before you start paying for solicitor
fees, before you start having an exchange debt on the property or putting forward, if it's an
auction property before you start bidding, I would definitely make sure that a builder goes around
the property, you tell the builder it's going to be a HMO, you tell the builder the criteria and
the standard you want the property and get a quote. If it's in perfect condition already,
it might only cost a few thousand pounds to get the property converted to a legitimate, safe house
in multiple occupancy. If it needs a bit of refurb on top of that, then it might be more.
But really important as part of your due diligence, make sure that you've got a builder to give you an
idea of how much it's going to cost so you haven't got any nasty surprises after you've completed.
plan are a guide. I've known people that have said, well, the estate agent said that the room
was 70 squared feet. On the floor plan, it says, look, 70 squared feet. Yeah, but that's the estate
agent's rough floor plan. You cannot rely on it or count it as gospel, especially if you're relying
on it to then get a license later on. I've known of situations where some of my students have bought
properties and it's not quite 70 squared foot. It's not quite the right amount. They're thinking,
oh my goodness, I relied on the floor plan. Now I've got this licensee coming out and this property
can't get a license. It's been really awkward. Some of them, I'm not suggesting you do this,
and this is not particularly ethical, but they've measured it with the licensee there and they've
just had to be a little bit generous, should we say, and they've just about got by because a lot
of licensees are pretty nice people and they're not all sticklers.
But you don't want to be in that awkward situation. You want to just make sure that you do that
before
you buy the property. So my advice as part of your due diligence is to, when you view the property,
make sure you have a tape measure with you. And if you didn't do it the first time, go back for a
second viewing and measure the rooms, especially the smaller rooms that might be on the
borderline.
Measure the kitchen, measure things. Don't rely on the estate agent's floor plan. That could be
flawed.
in the street, in the specific postcode area that you are looking to buy your HMO. There's nothing
worse than buying a property and not being able to rent out the rooms. And then you end up then
having to drop the standard of the type of tenant, which leads to another problem. And then that
leads to another problem. You end up thinking, you know what? I wish I'd never bought this
property.
And you have to do your exit strategy. So we don't want that to happen. So what I want you to
do is I want you to just triple check the demand. And how do you do that? You're going to speak
right now. Now you've got the property. You've found it. You're about to put an offer on it,
or you've already put an offer on it. Great. Speak to the HMO management companies that you
previously spoke to. Tell them the exact house. Show your peers and your property investor buddies.
Maybe create a list of the properties that you've already put on it.
A dummy ad, potentially. I know we spoke about that earlier. I did talk about the
ethical problems of potentially doing that. But you need to absolutely know 100% that there is
demand for rooms in that area. Don't just hear what you want to hear. If you spoke to three agents
and two of them say, it's really saturated. It's not going to work. And one says, I think it could
work. Don't just go, oh, that's good enough for me. And be an optimist. You've got to be a little
bit of a pessimist. You've got to be a little bit of a pessimist. You've got to be a little bit of a
You've got to think worst case scenario. If everyone's saying that the rooms are going to
rent out for £450 a month, you might have to think, well, would this still stack up at £375?
Certificate and this will show you a rating of how energy efficient the property is. Now
whilst that's always important, it couldn't be more important when buying a HMO property.
And the reason is, is because who's going to be paying the bills? You! So if the bills
are really expensive, that's going to cause a problem with your profit every single month.
So you want to make sure that the Energy Performance Certificate is at absolute maximum of a D
and the lower the better. If it's a B or a C, absolutely fantastic. You want to check
this because you're going to have to pay the bills in a HMO. Now you don't have to, you
can run HMOs whereby the tenants pay the bills. You can have it so that they pay with the
cards and they have a little meter in each room. This is a strategy, but it's not something
that I've personally done. All of my HMOs, I pay the bills. And the reason I do that
is because I pay the bills. And the reason I do that is because I pay the bills. And
the reason I do that is because I pay the bills. And the reason I do that is because
my perspective is, if I pay the bills, it makes it really easy for them to move in.
And right now in the age that we live in, convenience sells. I don't think people want
to be messing around with a key and people just want to move in and not think about the
bills. And the bills might cost me three or four hundred pounds a month on an average
small sized HMO. But I'm going to be able to charge extra rent for that to every single
very high. But I do want to check that EPC rating to make sure the bills aren't going
to be extortionate.
Utility Bills
Once you've checked the EPC and you know that the house is energy efficient and the area,
everything's okay, next thing is, how much are the bills actually going to cost? This is part
of your due diligence process because you don't want to have any nasty surprises after you buy
the house. So my advice would be to speak to some energy companies. Now, I use for my HMOs a
company
called Utility Warehouse. And the great thing about Utility Warehouse is, number one, everything all
comes on one bill. So your Wi-Fi, your broadband, your gas, your electric, it's all just on one
single bill, itemised bill. Second thing I love about Utility Warehouse is there's distributors
all over the country that distribute Utility Warehouse gas, electric, broadband, and the
utilities. So every time I sign up a house on Utility Warehouse, I'm going to go through a
distributor. Now, that's going to mean that the distributor looks after me. And it's also going
to mean that the distributor gets a little bit of commission. Now, what's that going to do? That's
going to mean that that distributor kind of becomes a bit of an ally of mine.
And in this business, in property business, you want as many friends and allies as you can get.
Because I've had it where I've given a few properties over to a Utility Warehouse distributor,
they've sorted out my gas and electric, they've given me a good price, it's all on one bill.
But then the distributor kind of feels like they owe me one, because they're getting a little bit
of a commission. So they end up saying, oh, Samuel, I found this property deal, actually. It's on for
£300,000. But the vendors really motivate to sell it for £220,000. And I thought I'd pass it to you.
That's an £80,000!
That's an £80,000 discount! So they get their little few quid here and there. And now they're
passing me property deals, which are making me a lot of money. So the good karma and the fact that
Utility Warehouse are pretty good, and the fact that they're energy efficient, and the fact that
they are all on one bill, I like Utility Warehouse. Utility Warehouse, you can get a quote for
absolutely free before you've even bought the house, which will give you an idea of how much
the bills, including the Wi-Fi, are going to cost you each month on a HMO.
So if you want to get a free quote from them, you can do that. If it doesn't work and you want to
shop around and use another energy provider, that's absolutely fine. But I'll provide my details of
someone that I know on the worksheet.
buy a property, you don't pay council tax. The tenant pays council tax. The only time you pay
council tax is if the tenant is not in there. If the tenant moves out and it's empty, then you're
responsible to pay council tax. However, with a HMO property, you, the landlord, should be paying
the council tax. Now, one of the things you need to be a little bit careful of as well is if the
property is split up and it's almost like studio self-contained apartments, the council may well
say that you need to pay council tax on every single unit in the house. Now, I've seen this
happen to people that have just got HMOs, that are just en suite HMOs, might have a little bit
of kitchenette in the rooms potentially, and then the council will say, that's its own independent
dwelling. You need to pay council tax on each unit. Now, of course, as a landlord, you
can't pay council tax for everybody if they've all got their own individual council tax. So the
things to stop this happening, you can do two things. Firstly, check with the council before
you buy the house that you're not going to have to pay different lots of council tax. Now, with
smaller HMOs, if you've got a four or five bed HMO that aren't completely self-contained, this
shouldn't be the case. But check with the council. The second thing you can do is you can have in
your contract, whatever contract you have with your HMO tenants, that should this happen, and the
council demands that every individual needs to pay council tax, that you, the landlord, will not be
paying, but in fact, they will be paying. So that's something I had to mention. However,
generally speaking, with HMO properties, you're going to pay one lot of council tax, and then all
the tenants are going to move in, and they're all going to have no council tax to pay. Well, what
does that mean? That means that you're going to have to charge more rent. That's why you can get
away with charging like 450,000 a month. That's why you can get away with charging like 450,000 a
month rent, each person. So you've got, say, five people. If they're paying 500 pounds a month each,
which is not unusual for a room, that's 5, 10, that's 2,500 pounds a month rental income from
your one property. So if you have to pay a few hundred pounds a month in bills, and maybe a
couple hundred pounds a month in council tax, then you're doing still pretty okay. How do you find
how much the council tax is going to be? You're going to go to a website, and it's called
mycounciltax.org.uk. That's mycounciltax.org.uk. And it's going to pop up with a little search bar
where you put the postcode of your property. You put that, it's going to tell you what the council
tax band is, and it's going to give you the exact amount per annum per year of how much you're
going
to have to pay in council tax. It's probably not going to be that much, and you're going to have
to factor this in when you later work out your return on investment of what you're expected to
Now, one of the things you should always look at is what's going to be the entrance for the tenants.
It can often be much more valuable and helpful to the property using the side door or even the back
door as the main entrance and blocking off the front entrance altogether.
Whereas if you just use the back door or the side door, you're going to have a lot more space.
So the first thing to look for in working out the configuration of your multi-let or HMO property is
which door is going to be the best door to use.
And they've ended up spending thousands of pounds unnecessarily making the front room smaller
than it has to be by putting corridors and passageways in it.
When actually they could have just used the side door.
Moving Walls
Moving walls. If a room is not quite big enough, I've seen situations where people are looking at
potential HMO, but the smallest room is just under the specific required size. That doesn't mean it's
a deal breaker. There is such a thing of moving walls. It's called nicking a little bit of one of
the bedrooms towards your bedroom. So if you've got one room that's 150 squared feet and another
room that's 60 squared feet, it probably makes sense to make the 60 squared feet a little bit
bigger by just moving the wall back. Now, if the wall is going to be a stud wall, it's very, very
easy to move. If it's a brick wall, it's still not that difficult to move, but it is going to
require a little bit more work. And to be able to tell whether it's a brick wall or whether it's a
stud wall is very simply by knocking on the wall. When you knock on it, if it sounds hollow, if it's
sound, then it's a stud wall. If it's a brick wall, when you knock on it, it's a hard, dead sound.
And that means it's a brick wall. The only time you cannot move a brick wall is if it's a supporting
wall. So if it's being used to hold up the something or to hold up a room, then you might not
be able to move it. A stud wall, hollow wall, to move it is very, very easy and inexpensive,
and you're talking hundreds of pounds to move it, not thousands of pounds.
Fire Doors
For a HMO, all the doors should be fire doors.
A fire door just means that if there's a fire, it's not just going to go straight through the door.
There are some that might withhold a fire for 30 minutes, and they're depending on how rigorous
you need to be.
Now, a fire door might cost around about £100.
It varies depending on the type of door, but to get a fire door is about £100.
To get a normal door that's not a fire door might be about £25.
So, the difference in price is not massive, and it's not like you've got dozens and dozens of doors in a
house.
It's probably going to cost more money to get the labourer to actually fit the door than the cost of
the door itself.
Now, not only are fire doors essential for HMOs, they're absolutely mandatory for licensed HMOs,
but they're good doors.
A fire door is a heavy door, it's going to last a long time, it's not going to be flimsy, and you probably
won't need to replace them for many, many years.
So, I'm going to leave a link in the worksheet where you can see some more information about
different types of fire doors, pricing, etc.
Creating Corridors
One of the things I've touched on already, and you'll probably need to do at some point in your
journey as a HMO investor, is create a corridor.
The reason you need to create a corridor is if you need to use the front door, and you open the front
door, and you're just ba-bang, straight into the lounge,
well, you might think, well, this couldn't be a bedroom, because you'd have to walk through the
bedroom in order to get to the kitchen.
Well, not necessarily, because if you open the door, the front door, assuming the front door is located
at the right place,
and this is a game where it goes to moving doors, moving a front door can be a bit more difficult
because it's bricks,
but the front door will probably be to the left of the room, you'll open it, and then you'll have the
room.
But if you just put a corridor, which is a studded wall, straight down, then you're going to be able to
walk through the corridor.
The only thing to bear in mind when putting corridors in is, of course, you are going to lose,
the...
So you need to be able to just make sure that the room is big enough to be able to put a corridor in,
and always be open minded to putting corridors in rooms, because it's something, as I said, you're
going to have to do at some point as a HMO investor.
And the minimum size for a corridor, by the way, is about 42 inches.
So that's how much it's going to take off of the room, when you need to obviously recalculate the
size of the room to make sure that it is big enough.
With a corridor.
Fireplaces
The first house that I ever bought, which I turned into a HMO, the sitting room had
a fireplace in it. And as a young person that didn't have much experience with property
and had never done a HMO before, I remember just thinking, this room doesn't feel like
it could ever be a bedroom. And it kind of put me off doing it as a HMO. And then someone
said to me, why? And I said, well, it just doesn't feel, they said, is it because of
the fireplace? Now the fireplace was so ugly. This was not a nice fireplace. This was a
really old, ugly, nasty fireplace. And I said, maybe. And I couldn't picture what it
would look like without a fireplace. Anyway, within a few weeks, it was a beautiful bedroom.
We'd removed the ugly fireplace. And I remember actually with my mom, I remember pulling the
fireplace out, knocking it down with a sledgehammer, and then just re-plastering over the wall.
And it took us a few days along with all the other work, and it made the room look completely
different. So the reason I'm telling you this is sometimes when you think, I can't imagine
I can't imagine this. It might just be something as simple as removing the fireplace to totally
change the look and totally change the feel. And remember, within buildings, within residential
homes, most things are possible.
Controlling Heating
One of the things people get really freaked out about the idea of buying a HMO is the energy bills.
They think with all these tenants in the property that aren't paying for the bills themselves,
what happens if they just run up the heating bill and go absolutely crazy and I end up the landlord
having to pay for it?
So I want to talk about how to control the heating and energy bills in your HMO.
So first thing I want to say is this. I don't think you should freak out that bad.
And an example I'll use for this is when I was single, before I got married, I remember I never
watched TV.
And I didn't leave any of the lights on. I hardly used most of the rooms in the house.
And when I got married to Amanda, I remember thinking, okay, so she loves to cook a lot.
She's African. She's always in the kitchen cooking these fancy dishes.
She's the kind of person that leaves the windows open and then leaves the heating on and puts
things on.
She wants to get a TV and she'll probably have the TV on all the time.
And I had to make a decision. I thought, you know what? I can either fight it and still probably lose.
I can just accept whatever and we'll just pay the energy bill.
And when we got married, I was like, oh, I'm going to have to pay the energy bill.
And she moved into the house that I was currently living in.
And even though she did all those things, she's awesome all the way.
Because it's not like a mobile phone where when you go abroad and use it and you're not supposed
to,
Now saying that, there are some things that you can put...
There are some things that you can put in place to make sure that the tenants don't go crazy.
The first thing, in my advice, is you can just tell the tenants.
Tell them, you know, listen, don't leave the heating on when you go out.
Don't leave the windows open and dry things on the radiators because it makes the heating
expensive.
So just have some basic common courtesy ground rules in the house rules,
which we'll be talking about later when we're talking about managing tenants.
So I think if you have respectable tenants and you just explain to them,
When I was starting out in properties, my builder and some of my landlord HMO friends,
they used to put matchsticks in the radiator so you couldn't turn it past a certain temperature.
What you can do now is there are smart thermostats that you can use where you can control the
heating device.
I'm not... I feel like it's kind of a very controlling thing to do.
I just tell the tenants to be responsible and don't freak out, and it's all of my HMOs are okay.
However, sometimes I'll have a investor friend over for dinner and they'll be there with the phone.
You know, smiling and turning the heating down and turning things off.
And I'm not really about that life, but you can get a smart thermostat which connects to your phone.
So those are some things that I'd like to say, some things that we might be able to help you to have a
more energy efficient house.
And of course, as part of your due diligence, you're going to look at the council tax bands.
You're going to look at the energy performance certificate of the house and of the area to make sure
that that to me, that's much more important than trying to control your tenants and make sure that
they don't leave things on, in my opinion.
Another really neat trick that I have actually got personally in some of my HMOs, and it is cool, is
lights that turn themselves off.
These are really easy to get put in. They're not that expensive.
And what it means is, normally I have them in places like landings, corridors, because those are the
kind of lights that just stay on all the time otherwise.
So this way, what happens is, as soon as the light detects movement, the light will come on.
And then when it doesn't detect movement, it might wait a minute or two and then turn off.
And it just means that you're not going to have landing lights left on.
I've only got these in my licensed HMOs, where there's a lot of people, lots of corridors, landing
space.
So I'll leave a link in the worksheet with a little bit more details on how this works and how much it
might cost.
Councill Guidelines
Council, council, council guidelines. It's really, really important that if you have got HMO, if it's
licensed, you're going to need to have the council be involved. They're going to give it a license. But
it's so important, and I can't stress this enough, that you do speak to the council, you work with them
closely, and you find out exactly what you need in the property for it to be safe, for it to be legal.
I can't necessarily give you absolutely everything you're going to need to think about because it
varies so much from house to house, from council to council. So I just wanted a reminder in this
section, please do speak to your council. It might be that you need soundproofing or sound testing to
then mean that you need soundproofing. It might mean that you need just some things that you
might not be aware of depending on the house.
And if it's an old house and the sound is really bad, the sound testing is really bad and there's cracks
and stuff,
it can be really a pain and it can be expensive. So before you actually complete on the house, I really,
really want to be making sure that you've got someone from the council give you a real lowdown,
you're working with builders.
If it's a small little four bed HMO, this isn't going to be the case. But if it's a bigger HMO and there's
not a license currently and you're going to be converting it into a HMO, then you need the right
people on board working with you.
just a little box. I use something called a key master and you can get them for about 10-15 pounds
from Argos. It's a little box with a four digit code on it. And what you're going to do is you're
going to set the codes to the key master boxes, and you're going to put one outside the front of
the property on your HMO. Now I personally for most of my HMOs have also got these little boxes
inside the house. And every room has its own key safe outside of the room. Now what I do is I'm
going to put a copy of the front door key outside. And then I'm going to have a copy of every room
key in the key box. Now the reason for this is because if ever a tenant locks themselves out of
their room, locks themselves out of their property, and they end up phoning you or if you've got it
managed phoning the management company, rather than you or the management company having
to go
You can simply just give them the code to the key safe. Now my advice would be and we're going to
get
on to this when we talk about managing tenants. But later every time anyone does lock themselves
out, you should change the code to the key safe. Otherwise, what will happen is they'll take the
key and then they'll just leave it empty and then they'll lose that key and you won't have anything
to give them. So key safe is really important. I'd probably get a lot of key safe. Maybe if you're
going to build your portfolio, just go and buy 20 key safes right now. And then you're going to have
20 key safes and you can visualize how many HMOs you're going to need. So they're about £15 from
Argos. I'll leave a little thing in the in the worksheet where you can look at key safes and you can
check out different versions of them and extremely important for HMO properties in my opinion.
En-Suites
En-suites. Do you need en-suites in HMOs? The answer to that is no, you don't need en-suites
in HMOs. However, if you've got an en-suite, it is going to push the value of the rent up a little
bit. Question you need to ask yourself is this. Number one, how much is it going to cost to put
an en-suite into a bedroom? Typically, to put an en-suite into a bedroom, you're talking around
about 2,000 pounds. Of course, the bedroom needs to be the right size, and it also needs to be
able to have the correct piping and stuff available, so you can't just put an en-suite
in every single bedroom because of limitations in size and positioning. But 2,000 pounds,
you need to ask yourself this question. How much additional rent are you going to get on that room?
If you're going to get an additional 20 pounds a month rent, or over a year, that means you're
going to get about 250 pounds. So is it worth spending 2,000 pounds to get an extra? Maybe it
is, maybe it's not. It's a decision that you have to come to.
Are you going to be able to put an en-suite into a bedroom? If you're going to be able to put an
en-suite into a bedroom, I think on average, you should never expect more than four people
to share a bathroom. Four people, one bathroom is just about okay. And I've got many of my
properties, there's four people, it's a small HMO, and they all share one bathroom, and it does work.
It also depends on the area. If there's a lot of HMOs, and the tenants in the area have got a lot
of choice, you might not have much choice. You might need an en-suite room in order to fill the
room. So this is also something that you should never expect. So if you're going to be able to
do something, you need to speak to your HMO management company when doing your due
diligence
about. You need to say, do we need en-suites? And you need to be careful, because sometimes HMO
managers will say you do need en-suites, just because they're a tiny bit easier to let. But
they're not the ones that are having to spend all the money getting the en-suites. So they'll
usually encourage you to get an en-suite, but in my opinion, you definitely don't need en-suites,
but it does depend on the house, and it does depend on the area.
managing HMOs, finding tenants, managing tenants. This is all something that I have a lot of
experience in. In fact, for the first few years of being a property investor, I used to manage
people's HMOs for free. So I've dealt with hundreds of HMO tenants, mostly professionals.
But in this section of the training, I want to go through all the pitfalls, the little tricks and
tips and how to find and manage HMO tenants. And also there's going to be a part of this section
where I'm talking about how to find a good HMO manager. So if you want to manage yourself,
or if you want to get a HMO management company in, this is going to be really, really helpful.
My first tip though, is this, don't mix households. So what I mean by that is,
you need to know, this is my product, this is my house, who is my market? Is it going to be
students? Is it going to be professionals? Is it going to be for people who are benefit tenants?
up the household. Because if you have a tenant who's a student here, a professional here,
someone who's on benefits here, it's just going to really cause problems. You want to have the
same types of people in your property. Sometimes even down to, I know there's a lot of HMOs that
have particular genders. So this is a female only, which might be a little bit too far in
your opinion, but I definitely think that you want the same types of people with similar backgrounds
right kind of property near a university, student accommodation, student HMOs can be very, very
lucrative based on the fact that there's not a short supply of students. There's so, so many.
If it's near a university, you're probably not going to struggle to fill it. Also, believe it
or not, students tend to be pretty good payers. They've got student loans that they usually pay.
And you're going to probably get a guarantor for a student. If they're very young, it might be the
first time that they've ever moved into a house on their own. So you might get a guarantor. But
generally speaking, students do pay their rent. They're decent tenants. They also aren't that
bothered about the property being luxurious. So if the property is a little bit shabby,
or if it's not perfect, if it's not a luxurious HMO, students aren't going to have a problem with
that, which I guess you could say is a good thing. The bad side to students is,
they do sometimes mess the property up a little bit. And this might sound really stereotypical.
You know, the typical students have loads of parties and things. And whilst that might or
might not be true, the bottom line is, they're young. They're often first time moving out of
parents. They don't know how things work in a house. They don't know basic things like to
leave the window open when you take a shower. Otherwise, you can get condensation and get
mold. That's the kind of thing students don't know. So if you're a student, you might want to
know how to move out. So if you've got a student property, how it will often work is they'll move
in and they'll move in for a batch of time, it might be a year or two years, and then they'll
move out. And then you'll move in a new group of students, you're definitely going to have to
budget for a refurb, cut new carpets, the house is going to be repainting, you're probably going to
need to fix up the kitchen and stuff, because they do just bring a lot of wear and tear onto
the property. Another problem with students as well is they sometimes can attract trouble,
because they're young and they're not like a professional person just wants to keep their head down,
go to work.
A student, yeah, you're going to potentially have your hands full with a student.
So definitely 100%.
Because if you've got a professional house share and then you're desperate to fill a room but you
can't and you move a student in, the professionals are going to really hate that.
Professionals
Pros and cons of professionals. Now when I say professional, I'm just talking about a working person.
Someone who might be a nurse, or maybe a receptionist, or they might just work in retail. I'm not
necessarily meaning someone who's really white collar. Now, if your HMO is in quite an upmarket
area, you might choose to particularly go for a high white collar type of professional. If it's in a
slightly more working area, then you might go for the blue collar.
People that work in retail, maybe even McDonald's workers, you know, that could be the vibe you go
for. And it sounds really kind of almost judgmental. And we're living in a very politically correct world
where it's difficult to talk about these kind of things. But the bottom line is, be under no illusion.
Every single business knows their market. They know what kind of person, what kind of, you know,
where they work, their budget, everything.
They have that kind of person in mind. So this is not being discriminative against different types of
people or different types of workers. It's just, I want to create my product within the viewpoint of
who my market is. So professional, good thing about professionals is professionals tend to keep
themselves to themselves. They're busy, they're working. So, you know, they've got their own lives.
They just want to just come in, treat it like a hotel, come in, sleep, go to work.
The stuff will be off when they're out. They look after it. They're grownups. So that's the good thing.
Also, professionals tend to be decent payers. Of course, you're going to have to go through all the
vetting and credit checks and stuff, which we're going to talk about later. So that's the good thing. I
like professionals. My HMOs are all professionals. So the bad side of professionals is with
professionals, they can sometimes be a bit picky. Sometimes you have to you have to really set
expectations, right? They're going to
sometimes they treat it like a hotel too much, where they'll complain that the light is not
working in the hallway. And actually, it's just because it needs changing. And rather than just
changing it, you know, so you can get a little bit of almost like snobbery as if, oh, this is
just some hotel and I expect high expectations. Or if there is, you know, something small wrong
with the property, you know, a little bit of steam on the windows inside, and they'll be like,
oh, I don't like that. I like to have a proper clear view. You can get that a little bit. But
personally, I would rather that than people messing up the property. And of course, professionals can
do that as well. So that's the pros and cons of professionals. I'm probably biased because I make
a lot of money from professionals. But again, I'll stress to you, don't mix the two.
Council Tenants
Benefit tenants. I have got some tenants who are on benefits and let me explain how this works. So
if you're a benefit tenant, you don't pay your own rent. The council pay your rent for you. Now,
sometimes the council will give the tenant the rent and then the tenant will pass the rent on,
or other times the council will just pay the rent direct to the landlord. I, by the way,
much prefer the latter and they have made it more difficult for this. A lot of councils insist
that the rent goes straight to the tenant and you need to be really careful because again,
not meaning to be stereotypical or anything like that at all, but sometimes people that are on
benefits aren't great at managing money. So you want to make sure that as soon as they get the
money from the council, you want to make sure that they pay you. Don't just say, you need to
pay on the 28th of the month. You're going to say, okay, when do you get paid from the
council? You're going to say, okay, when do you get paid from the council? You're going to say,
you get paid on the 15th? Great. You can pay me on the 15th. Also, you get paid in arrears as well
from the council. So most tenants, when they move in, they'll pay their rent upfront and they'll
always be ahead of time. Whereas the way that the council pay is they pay in arrears, which means
that you'll move in, you'll live there a month, and then you'll pay that month that you've just
had, which is obviously not as good from a landlord's perspective. You always want the rent
let's talk about the pro for a second. Pro of council tenants are that the rent is not guaranteed,
but it's kind of close to guaranteed because if the council are paying it, the council aren't
going to ever go, oh, I'm short this month. Sorry, I can't afford it. Whereas professionals can do
that. Students sometimes do that. So council tenants do tend to be pretty good payers.
So that's a good pro. A con on that same point is if their benefits get stopped,
they become uneligible for whatever reason, then suddenly you're going to really struggle to get the
money out of them. So that can be a con. Also, of course, a con can be if they get paid direct,
that they don't pass it on to you. Another pro of benefit tenants or council tenants is just because
the council say that they'll pay X for that house. Let's say that, and you can get a lot of money,
by the way, from council tenants. I know landlords who are very, very wealthy, make a lot of money
properties for council tenants. And what they often do is they'll buy properties. They know what
the rent's going to be. That's another pro. You can find out how much the council pay for particular
size rooms in HMOs, and you can look at an area and you know what your rent's going to be, as long
as you can put a council tenant in there. Let's say the rent's going to be 80 pounds per week per
room. Well, what you can do is you can charge 85 pounds or 90 pounds and ask the tenant to just
pay
a little bit of tax. So that's a good pro. So that's a good pro. So that's a good pro.
Now, I know a lot of landlords do that. That's not something that I've done. I don't really have
many council tenants. So, that's another pro. The con of council tenants is sometimes they might not
be the kind of, and again, this sounds really stereotypical, but it's not. It's just that people
who are on benefits, a lot of them will be really good people. You might have single moms or people
that are just relying on the state to help them with their rents. And I don't see a lot of people
and that's fine. But some tenants that are on benefits, they because they don't have jobs,
they spend their time just watching TV, messing up the house, wearing tears high, maybe they're
also doing other things because they're not working. They're doing other things that aren't
the kind of things necessarily that you want going on in your house. So there's just a risk of that.
And there's always a risk of that. The only times that I've had council tenants have been when
I've put a professional into a house, and then the professionals lost their job. And they've said
to me, look, I've lost my job, I'm really struggling, and I'm going to be applying for
some benefits in between jobs. And I've not kicked them out for that reason. I've not said no,
you can't do that. I've let them but it's not really, really ideal. So this is just something
that you're going to work out what kind of tenants you want. It might be that you want
council tenants, it might be that you think it's better financially, and it makes commercial sense,
That could be something that you feel really passionately about. And you want to provide
really good accommodation for council tenants, in which case, that's brilliant, go for it.
But don't mix the two. Don't try and have professionals with council tenants,
because it really, really is going to end badly. So that is the pros and cons of council tenants.
And now you've heard about students, you've heard about professionals, you've heard about
council tenants, what I want you to do right now is I want you to think about what kind of tenants
do you want to have? And I want you to think about what kind of tenants do you want to have?
And I want you to think about what kind of tenants do you want to go for? What kind of tenants will
work best in your patch, and then just write it down and be really clear on who your demographic
is and who your market is for your product, which is your HMO. Write that down, get really clear on
that. And that will help you moving forward. Because honestly, some HMO managers, I don't
appreciate it when they do this, but they'll try and mix the households. So you need to be really
clear. This is my demographic. So write it down, get really clear on it, and then go to the next
video.
HMO? What do I think about that? What should you think about that? Here's my thought process.
There are pros and cons to doing a female-only HMO. In my opinion, probably you shouldn't do it,
but it's of course completely up to you. Male-only HMOs, I don't really think they exist. I've never
seen a male-only HMO. I think the reason they don't exist is because if you're a man and you
see a male-only HMO, you're probably just going to be like, meh. It doesn't matter. You don't care
if there's women there. If you're a woman and you see a male-only HMO, you're going to be like,
well, that's not for me. You're not really pleasing anyone. Whereas if you're a woman
and you see a female-only HMO, you might well be more attracted to that HMO because maybe you
don't
to them. Now, the con of female-only HMOs are that you're basically rejecting and saying no
to at least 50% of your potential market. So you're losing a lot of potential tenants,
but what you are doing is you're giving more attraction to some of the other 50%.
I've never ran a female-only HMO, but what I have seen many of my students do, which has worked
really well, is if they've got a HMO and they're just renting it out, not female-only, just renting
it out, and two or three females happen to move in and there's only one or two rooms left,
they think, well, actually, there's already got quite a few females. In order to fill these next
Because this has kind of happened by mistake. And I do know people that have had a really good
success doing that. And I think... Okay, I'm really trying not to be stereotypical,
but I think women probably do make better HMO tenants, okay, in my opinion, because they do
tend to be a bit cleaner and tidier. So there is an attraction to that. So if you're watching this
and you want to try and run a female-only HMO, my advice is go for it if that's what you want to do.
I've never had to do that.
In order to have good tenants, in order to fill my rooms, I love man tenants. I love women tenants.
For me, it's more important that they're the same. If they're professionals or students or
counsellors, they're the same in that way. But when it comes to things like gender,
I don't think they have to be the same, but that's down to you.
House Rules
House rules in a HMO. So what this is, is if there's a bunch of people living together,
there might be strangers that you've put together, what are the rules in the property? What's the
etiquette? Now, if you don't have house rules, what will happen is they will just make them up.
And to be honest, most house rules are kind of common sense anyway. So if they just make them up,
that's not a problem. But the problem comes if then people move out and other people move in,
and you're better off, in my opinion, to just put down some really clear basic house rules right
from the very beginning. And it's going to stop any arguing. It's going to stop any misconceptions.
It's going to stop people coming to you or the management company and say, what's this? What's
going on here? What do you think about this? It's much simpler if you can just lay down
the basic house rules at the very beginning. So I'm going to give you my typical stance on
house rules. You can decide what the house rules are. It might depend a little bit depending on
if it's council tenants, professionals, students. So there's different factors into it. But these
are the basic 15 points. And I'm going to leave in the worksheet an example of house rules. And
what you're going to do with these house rules, you're going to have them up somewhere in the
communal area or in the kitchen for all to see. So these are the things you might need to consider.
Firstly is tidiness. People will need to just tidy up after themselves, not leave things lying
around, not leave things in the communal areas. First point. Next, cleanliness. People need to
clean up after themselves. And we're going to talk about whether you need a cleaner or not later on.
But if people are doing things like having meals, they need to clean their own dishes and put it
back in the cupboards. Just common courtesy and cleanliness is really important. Smoking. I don't
have any of my houses as a smoking house. So if they do want to smoke, I tell them where to smoke,
which is outside the property. And I even leave little ashtrays and things for them.
So you can smoke. If you smoke, that's no problem. But it has to happen outside.
Noise. They must be considerate. They must keep it down, especially at nighttime while people are
sleeping. Different people are coming in, working different shifts. So be respectful. Don't be
noisy. If people can hear your loud music and they're in their bedroom, then that means you're
probably being a little bit too loud. Next is sleepovers. If they want to have their boyfriend
or their girlfriend or someone come and sleep over, that's not a problem as long as it's a
one-off. So you can have a rule. Normally, we say once or twice a week maximum.
And if it's more than that, then the other person needs to be on the tenancy agreement.
Privacy. You need to allow privacy to the other housemates. So sometimes they can become friends.
I've even had it many times where my housemates have actually got into relationships. I've even
had invitations to weddings from my tenants, which is really nice. And I love that happening.
But there's nothing more awkward than someone liking a housemate and the feeling is not mutual.
And then one gets spooked out. So one of the rules is just privacy. Give people privacy,
if they're in their room. Don't disturb them. Don't knock the door. Give people privacy in their own
rooms. Bins. How often do the bins need to be taken out? Who's responsible for that? That's
something that the tenants need to really do themselves. You can't be sending people out to
clear the bin out. They need to put things in the bin, put it in the wheelie bin,
leave the wheelie bin out. And that's something that I think the tenants should do. So
that's important. Doors and locks. Not to tamper with doors or locks or change anything. Change
locks,
keys to keep everything in its rightful place. Pets. No pets. If you do want to allow pets,
then just make it really clear what the stance is on pets. But I typically say no pets. Alcohol. If
they want to drink, that's fine. But my rule of thumb is that they can't get drunk in the house.
So if they want to have a beer in the communal area, no problem. But to get drunk,
I think that's where it's too far. If you want to do that, you go to the pub,
but you don't get drunk in a professional HMO. Parking. What are the rules on parking? There
may or may not be parking at your HMO. If there is a drive, you need to decide who you're going to
allocate the spaces to. Is it first come, first serve? Or does someone pay extra and then they
have the parking spot? So that needs to be really clear. Drawers and kitchen space. I personally
have found it's better to let the tenants just sort themselves out when it comes to space in
the kitchen. Because as soon as you start trying to allocate people certain space, it just causes
they just share. But you need to tell them what is expected of them. If you want to number the
drawers and say, this is number one, two, three, four, five, and you will have a cupboard each,
that's fine. But you need to just tell them what the crack is when it comes to drawers and kitchen
space and who has access to what. To be respectful and kind, no name calling, bullying, anything like
that. Again, it's kind of obvious, but you need to put it in house rules. And then lastly is a
complaints procedure.
So should they feel disgruntled, unhappy? What is the procedure? And for me, by the way, the house
rules are very different to the AST contract or the tenancy agreement. The tenancy agreement is
between you, the landlord, and them, the tenant. That's private between you two. The house rules
are the house as a whole. So the complaints procedure would be if they're falling out,
bickering, arguing, or there's a problem, what do they do? And normally in the complaints
procedure,
If you have an issue with one another, just sort it out. Because what you don't want is you
don't want to be their babysitter. And you don't want the H 없고 management company to be their
babysitter. So sort yourself out, you're all adults. If you don't like someone in the household, then
don't deal with them. Just sort it out, follow the house rules. However, if he gets unbearable,
and you have to, then this is what you do, you need to contact this person, and that might be
yourself or might be the management company.
So it's clear, so they know. You don't want them ringing J's or something.
If you know that that's too disfil to them if you meet on that whether you're in on the own by that or
if
you every five minutes because they feel like they had a dirty vibe from one of the other
housemates.
So that's the kind of things I'll leave in the worksheet. I'll leave a house rules template and
you want to print it up. You want to blow it up. And something very interesting as well, a little
point. They will often add house rules. So what I do is I laminate the house rules so that they
can't just add things to it because they will. But then the person that added to it might then
move out two weeks later. So I don't like it when they add things to the house rules.
But ultimately, all I care about is that they're happy. I've had situations where my tenants,
I've had five tenants all in the property, all individuals, and they've all been there years.
So if they want to create house rules and have their own code and value system,
then that's absolutely fine. As long as they're getting on, as long as I'm getting paid,
and as long as the house is in good condition, I'm fine. But good idea, get some basic house rules,
blow it up, laminate it, print it up and put it up on the kitchen or in the lounge.
Cleaner
Should you hire a cleaner to go to your HMO property every so often, or should you expect
the tenants to clean up after themselves? In my opinion, generally speaking, it makes sense to
pay a cleaner to go in every so often. Now, I would probably recommend once or twice a month
would be enough for a cleaner to go in. Now, it's really important that you know that the cleaner
isn't going in to clean because the tenant shouldn't be cleaning. Of course, the tenant
should be cleaning, cleaning up after themselves, hoovering, keeping the place tidy. What I've found
is I used to not want a cleaner because I used to think if I get a cleaner, then the tenants are not
going to do anything and they're just going to rely on the cleaner, whereas they shouldn't be
doing it themselves. But what I've found was, number one, having a cleaner is not very expensive.
You're talking about £12 per hour for a decent cleaner. They only need to go for two or three
hours and just do the communal areas, put the hoover around,
kitchen. So it's not that expensive if someone's going once or twice a month for two or three
hours. And what will happen is the tenants when the cleaner comes, it will actually make them
want to keep it clean. And before the cleaner comes, they'll probably not want to be embarrassed.
So they'll make sure it's tidy. So I found that a cleaner actually complements and adds to the
tenants being cleaners themselves. And also the tenants tend to really appreciate it. So I think
it's a worthy investment to have a cleaner in your HMOs if you can. But of course, this is a
HMO Tenancies
Tenancy agreements with HMO properties and HMO tenants,
back in the day where you can give them two weeks notice
and also just basic things like when they move in,
AST contracts for you and can give you any help
Deposits. If you are going to be taking deposits off of your HMO tenants, you need to register
the deposits just like any other tenant in any other property, and you can do that on
mydeposits.co.uk. The reason you need to register it is a lot of landlords back in the day would
charge deposits from their tenants, and then the deposits, they would just spend the deposit.
They wouldn't register it, they wouldn't keep it safe, they'd just spend it. Then when the
tenant moves out after a couple of years, the landlord would say, sorry, I've spent
it, or even worse, pretend that they never received the deposit in the first place. It's
by law, you have to register the deposits. It costs, I think, about £30 to register
a deposit. Now, you might take the approach that you don't want to bother charging deposits,
and that's fair enough. I know a lot of HMO landlords that don't bother charging deposits.
The only downside to that, while you will save yourself a bit of hassle and a little
bit of red tape and bother having to register it, also a little bit of money because it
The only downside to that is that you don't want to have to register deposits. The only
downside to not taking deposits is if they do damage the property when they leave, then
you can't get that money back very easily. Whereas if they've given you a deposit and
they just disappear, or they damaged part of the property, then at least you've got
a deposit from them, and you can deduct that from the deposit and give them the difference
left over.
Budgeting for problems
Budget for problems. With HMOs, it's really funny because you can literally go a year or two with
tenants, no tenants moving out, no problems, no maintenance issues, and you think, this is great.
I'm making £1,200 profit a month. Isn't it fantastic? Guaranteed, there'll be a time when
the tables will turn and you'll have a season of hell whereby all the tenants will start moving
out. You'll put new ones in. There'll be problems. You'll be evicting somebody. The boiler will then
break and you're like, oh my goodness, what's going on? So budget for problems, not just budget
as in terms of time. And that is important because you might think, you know what? I don't need a
management company. They all get on fine. You know what? I'm just going to go away for a few
weeks. I'm sure they'll be okay. Don't do that. Because when you go on holiday, if there's a
problem and there's no one there to fix it, you need to budget for problems in terms of time
and finance. You need to make sure that you're putting at least 10%
of the...
Complete rent aside for maintenance issues. Now that might sound like a lot of rent. If the rent's
two grand, you might think, do I really need 200 pounds a month? There's not been any
maintenance
issues for the last six months. You need it because you don't know when suddenly things
are going to happen. So budget for problems because they will come. And it's not a big
deal if you expect it. If you just budget for it, it doesn't matter. It's not a problem. It's just,
oh, the boiler's broken. Well, I'll fix it because I've got my money.
It's only a problem when you don't expect it. So I'm telling you now, expect it. Also with HMOs,
there is going to be problems. People will fall out. People will argue. People will move out.
It just happens. And you can't have all of the best and all of the good points with none of the bad.
The good thing about HMOs is they're cash cows. You've got like five, six people in one house
paying you rent. It's brilliant. They're much more profitable than single lets. But sometimes
problems come. Expect it. Budget for it. Be ready when it happens.
talk about how to find a good HMO management company. Now, firstly, I would expect that
before you buy a house, you already have spoken to HMO management companies in the area. So
you should already have a few management companies to potentially pick from. You can find them
all over the place. Google HMO manager in the area, find them that way. Go on Spare
Room and look at all the different agents managing HMO properties. Go networking and
ask people who manages your HMO properties so that make sure you've got a lot to choose
from. Never fall under the trap of using a normal letting agent to manage your HMO because
they'll tell you they can do it, but they can't. You need to find someone that specialises
in HMOs. Ask them what they do. Ask them whether they do a full management service. Ask them
if they've got connections to maintenance people in the area. See how professional they
are. Ring them up and pretend to be a tenant and make sure that they answer the phone,
promptly and professionally and see how they talk to you. Because how they talk to you
on that role play pretend mystery shop call is how they'll speak to your future customers.
These are the kind of ways that I find HMO managers and also go with your gut feeling.
If you've got a bad gut feeling about a company, just think, I don't like this company and
there's no rapport, then don't use them. Choose somebody else. If someone's got a good rapport,
good track record, look at the other properties that they're managing. Ask them questions
like how long does it take to fill rooms? How much do you charge? Get them to come and
onboard with you on this mission of being a HMO owner and they'll be a HMO manager.
And never resent paying them good money. If they charge you 14%, pay them 14%. 15% is usually
about top end. But listen, don't resent it because they work bloody hard for their money,
they don't own it. They're doing all the management and they're giving you a fixed
guaranteed rent, which can work for you. I've got people that do that on my HMOs.
However, if you really like managing HMOs, and if you've been listening to this thinking,
I'd love to manage HMOs, and you want to get your hands dirty, you want to get into it,
you want to get experience, then it's very, very, very worth considering doing rent to rent on HMO
properties. And what that is, that's when you find people that have got HMO properties,
and you give them a guaranteed rent, and then you manage the property and you keep the
difference.
So if you've got a property, and you pay the landlord five or 600 pounds a month,
but then you rent it out for 2000 pounds, after all the bills and everything, you might be left
with a profit for yourself of 500 pounds a month. Well, that's not bad to make on a property that
you don't own just for doing the work. And rent to rent is a whole different strategy. But if
you're a property owner, and you're a property owner, and you're a property owner, and you're
a property owner, and you know about HMOs, which you now do, you know how to find them,
assess them, you know to manage them, you know everything about HMOs. So it may well be worth
looking at doing rent to HMO. And we do run a program called rent to rent accelerator. If you've
got that program, fantastic, because with the knowledge that you've got about HMOs, you can
absolutely kill it in rent to HMO and become financially independent quite quickly with that
strategy.