Eventually at some point…interest rates will rise….eventually at some point auction rooms will be empty….at some point people will realise they made a mistake by over-leveraging on property.
Many of us who experienced the last crash heard comments like this from 2004 right up through 2008. Though some investors sensed what was coming, the majority did not. In fact, many of us paid a dear price for our blindness. I have gone through 3 real estate crashes in my career….Firstly in college in the 1980s when I fully did not understand what it meant with interest rates at 18%…then in 1994 when interest rates spiked and of course 2007. I stopped virtually all of my property in Jan 2006….There will be a slow down….or even a crash….regardless people have to live somewhere. People will still have to pay rent. The greatest maximisation is a HMO where you have shared rooms…some with en suites…and shared kitchen.
At this point in my career, I really like low-risk, stable, careful, and predictable deals. So for me, the stabilized value-add play ideally fits the bill. This is HMO. Yes they have their issues…but they do have a maximisation of rents.
The simplest way I can quickly explain the value-add opportunity is buying an asset that has a given, known return on investment (ROI) and meaningfully improving some aspect of the property in a way that the ROI on the improvements is much higher than the ROI on the asset as a whole. In other words, meaningfully raising the average ROI on the entire project. This is exactly what a HMO is and does….
More so, you need to buy right…you need the right areas that will rent quickly. The best place I know this personally is Manchester. As prices are going down in London…Manchester prices are still increasing. Competition is tight for quality HMO properties in and around Salford.
Eventually at some point…interest rates will rise….eventually at some point auction rooms will be empty….however people need to live affordably. Professional and Social HMOs offer the lifeline of income during tough economic periods.
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