Property is the perfect example of ‘owning stuff’. More so, owning Professional HMOs are even a greater way of generating wealth over time. It’s one of those hard assets that keeps its value well against inflation and there is a limited supply. Especially in Manchester supply of professional and even social HMOs are being limited by both Article 4 and density issues.
However Property investing and even more Professional HMOS aren’t all it’s cracked up to be. It’s not the passive income miracle you hear about on 3 am infomercials, or countless course seller and it’s not the get-rich-quick strategy many thought it to be before the housing bubble burst.
I have seen some of the biggest mistakes in property you can make but also a lot of lessons learned. I have seen those with not enough liquidity jump in and over leverage. They think they could pull out all their money after every professional HMO deal or buy to let. During the good times ( which we are in currently now) Property prices are booming and nothing, nothing could go wrong with so many investors property strategy. However…ding…Property crash…happened.
More so, Some of the biggest property mistake is a trap many fall into and one created by the get-rich books and promoters. These books present property as a passive income source where all you do is finance a portfolio of rental properties and wait for the tenants to pay off your mortgage. As well as finding a property manager who will look after your property or Professional HMO as you would
The truth is that renting buy to let or Professional HMOs are about as far from passive income as you can get. We have Professional HMO, Social Housing HMOs and buy to lets. The only thing that is somewhat close to passive are the Social Housing HMOs which are on 5 year contracts…no voids …no management…virtually no maintenance. With Professional HMOs there will always be drama. We just had a tenant make up every excuse possible and not pay. Well we got him out and that is proper Professional HMO management.
Contrary to the property passive promoters….it’s difficult finding property management for small, buy to let portfolios and even harder Professional HMOs. Most professional managers don’t want the hassle of small buy to let rentals but will make a concession if you’ve got a larger portfolio. You can virtually forget about finding a quality Professional HMO property managers. We have tried several and now self manage. However there are good property managers….however we have not been lucky enough to find them.
Self managing buy to lets and Professional HMOs by yourself is daunting if you do not have experience. Firstly a good idea to estimate a vacancy rate of at least 10% or more depending on your region. That gives you some financial flexibility and helps you understand if the cash flow will be enough to cover expenses. If you do not focus on your properties,the vacancy rate can increase well beyond what you might have estimated.
It does not take that long to burn out. I have seen many investors who didn’t start eviction proceedings as soon as they should have after non-payment. Even after a tenant moved out, it would be a month or two before they spent the week necessary to clean up the house and get it back on the market ( our non paying professional HMo tenant did not pay…he left and immediately we had a cleaner go in and immediately we posted on spareroom.co.uk to fill the void). This is active management for a professional HMO and teamwork.
All the while a mortgage payment needs to be paid. I have seen too many so called property investors go broke and their dream of being the next real estate mogul was being foreclosed.
I have not even focused or mentioned about all the promises of builders or sourcers. Believe me, Property investing is not as passive as too many say!