Fingers Burned with HMO Properties
Clearly in every situation you those who make a great deal of money in UK properties, especially in HMOs ( Houses of Multiple Occupancy) and there are those who do not. I have encountered 2 stories over the weekend of 2 new investors with deep pockets that both got their fingers burned on HMOs in Liverpool. These were new investors who simply wanted a return on their money. Proverbial armchair investors almost similar to those who invest in Student housing with guaranteed rents for 3 years.
These investors were promised by their perspective letting agents that all issues would be handled, the proverbial ” Leave it to me”. Well these investors did leave it with the letting agents. That was the problem. Now one investor has 2 completely empty properties.
No income and no tenants. To make matters worse these investors do not live in the UK.
We had spoken to them prior about our HMOs that we prepare that are let for social housing with guaranteed rents, no management and no voids to a major UK PLC. We have been selling our properties at between 8 1/2 % to 9% and were told at the time they could do better. These investors were promised they could get 20% or more returns on their money. These investors forgot about voids…maintenance…management fees of at best 8% or worse up to 12%. All of these expenses, especially voids eats into the profits of a HMO.
UK property investments need to treated as a business. If you owned a store would you give someone the keys to your store and completely walk away?
Lesson to be learned…Do not chase promises or high yields.
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