- Here's a question for you.
Should your first property be an HMO?
And if so, what sort of things
should you really be considering?
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Hi, my name's Tony Law from Your First Four Houses
and I teach people how to do the small property portfolio
that generates a great income for them
so they can give up their day job, if they wish
'cause they're now financially free.
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So, having your first investment property as an HMO.
Does that kinda make sense or is it just a little bit mad
to even consider your first property being an HMO?
I think most of us know the advantages
of building an HMO-based portfolio
it simply comes down to a far greater cash flow
compared to having single buy to let properties.
And I've got to make it really clear from the onset,
I'm very much pro HMOs.
Certainly, they massively helped me
in terms of placing my income.
But, I've gotta be really honest, right from the onset,
and say, there are a number of challenges
with building an HMO based portfolio.
And very specifically, that first one.
So, let's consider some of these, right now.
Well, the first thing to consider
is that no many lenders will actually lend
on a HMO, if this is indeed your first property.
So, of course, you need to go speak
to an independent mortgage broker.
Somebody with access to the whole of the market,
sit down with them and ask the question.
This is assuming that you're gonna buy
that first HMO based property.
There are other strategies that we could talk about
where you could build up an HMO based portfolio
without buying,
but if you're buying, go and speak with the mortgage broker.
Now, if you are buying, HMOs are obviously gonna
be generally speaking more expensive property
than a single let,
which is probably going to mean you're going
to need to put more money in than buying a single let.
Then again, may be a consideration for you.
HMOs tend to be more hands-on,
whereas, single lets tend to be more hands-off.
So, you are generally gonna be going over
to this property, more,
especially if you are actually managing it.
Which leads me on to, do you like dealing with tenants?
If not, then you're gonna have to factor in some kind
of management of the property.
Now, single lets, I've got quite a few single lets.
To be honest, I hardly do anything with those.
The tenants stay there.
They're very happy.
They're nice properties, to be fair.
But, I hardly do anything.
They're very happy.
They just pay the money, each and every month
and I get a small cashflow
over and above the mortgage amount.
But, other than that, I just leave them alone,
very hands off.
Whereas with HMOs, you tend to be far more hands on.
There's more legislation you need to take into consideration
and you need to be up to date with this.
It is so important in this day and age,
especially if you are self-managing.
There's a far higher or far greater chance
that there's going to be more wear and tear
with that property, if it's an HMO.
You are going to be going over to that property more often.
Which leads me onto the fact
that you really should have a handyman,
somebody that you can just pick up the phone
and give them a call and they'll go over
with a key, they'll always have a key.
And they'll go over and do any maintenance work for you.
So, if this is your first investment property
to be really honest with you, my suggestion is,
and I know some are gonna disagree with me on this,
but my suggestion is,
make that first property a vanilla type buy to let.
First of all.
I know a lot of people are gonna argue with that
but, that's just my personal view.
Make that first one a vanilla buy to let,
rather than an HMO, in my opinion.
But really importantly, focus on putting your money
into that property and getting that money back out, again,
as quickly as you possibly can.
Say within 6 to 12 months, so that you have that property
in your portfolio, but without any
of your own money in there.
Now, if your not sure how to do that
can I suggest you watch this video, here?
I'll also put the description in the box below.
All of this is a free mini course.
If you haven't watch it already,
if you haven't taken my free mini course,
please do it.
There's no charge
and it will teach you exactly how you can put your money
into properties and get it back out again, quickly.
And as I said, I'll put it in the description box below.
But, if you do want to go down the HMO route,
that's absolutely fine, but can I make a suggestion?
Look at doing a rent to rent type strategy,
first of all, with that first property.
Why?
Well, you're gonna learn so much from doing that
and it's also a really great way to check
if there's enough demand in the area
that you're looking for.
And also perhaps more importantly,
check if you really like that.
It's so important though, wherever you're actually investing
that you focus on one thing, in my opinion,
and that is demand.
Only invest if there's a decent demand in HMOs.
If there's a decent demand in the area
that you're looking to invest in.
Because honestly, that takes so much pressure off,
if you're fighting to find tenants,
and definitely, in some parts of the country,
it is a real challenge, finding tenants,
whereas in other parts of the country,
where there's good demands still,
it's quite easy to actually rent those rooms out.
You've only got to put an advert out there
and boom, you'll get inundated.
One other option, I just wanted to float by you,
if you're considering single lets, HMOs,
one other thing you might want is maybe, just maybe
buying your own home, or buying your next home,
and buying it where you're gonna
get yourself either a really good discount
or you're gonna add value in some substantial way,
and again check out that mini course,
which will teach you exactly how to do that,
and then maybe use the government's rent a room type scheme.
And if you're not aware of this,
this give you the ability to earn
7,500 pounds, completely tax free, at the moment.
I'll put the link to that in the description box below.
You might want to check that out
as a slightly unusual third strategy.
And as I say, when you're gonna buy your property
that you're gonna live in,
maybe you're gonna buy that below market value,
as I've done many times
or maybe you're gonna add substantial value,
as I've done may times.
I'm suggesting that can still be
an investment type property,
but as I say, government rent a room scheme,
definitely worth looking at.
But, I want to really emphasise,
I don't want to put you off HMOs, I really don't.
I just want to open your eyes to some of the challenges
that may be out there.
I know some trainers, sort of flag it up as being,
it's relatively easy to build an HMO based portfolio.
I just want to point out that it's not as easy
perhaps, as some people might suggest it is.
In my completely free online property mini course
I teach you how to build a small portfolio
of properties without needing to put big deposits
into each and every deal.
Simply click the link, here,
on the description box below, to find out more.
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