We all make mistakes…However in Property mistakes can be very costly.
First mistake is not really knowing the value and potentially overpaying. With Professional and Social HMOs what really are the value…Brick and mortar…or the income…or a combination. Everyone I speak to including surveyors seem to come up with a slightly different variation.
For example we were speaking to a group of London gents and they did not want to over pay for our Social HMOs. We agreed that we put substantially money in each Social HMO building. We transformed the property from a terraced house that might generate at best 500 Gross a month to one that generates net 996 on a 5 year contract…no voids…no management…virtually no maintenance…
So how do you compare….we looked at some comps on Rightmove and they realised they would not be overpaying.
So rule one…do not over pay!
In order to be a successful flipper or wholesaler, you will definitely need to be able to get great deals to earn that quick profit for you and your end buyers…When you buy right, you create some great immediate equity on your HMO investment.
London calling…now maybe crying…
One of the biggest mistakes that investors make is purchasing HMO properties with very minimal (or even negative) cash flow simply based on their unsubstantiated hopes that these properties will appreciate in value. This, however, is an extremely risky move, as the market can fluctuate rather quickly, and it is impossible to always accurately predict. The same goes with buying off plan…I have seen 3 real estate recessions…same problems…just different names.
Actually the best thing to do is to purchase a HMO property below market value or improve a HMO property to add value. In addition to this, it is a good idea to purchase a HMO property that already has a positive cash flow, as this will allow you to bring in income as soon as you rent out the hmo. Not that easy to do all the time…you need to be present…you need good communication with your builders…you need to focus.
For example I spoke to a London Gent who is doing ( trying) to do a Professional HMO with a sourcer in Manchester. He never saw the property…never had the works inspected….he will probably have an issue.
Do not buy blind. We always invite our investors to come and meet us and see the properties first hand.
We are cash flow investors…we are not hoping for increased prices. They are a gift when and if they happen. When you are investing for cash flow, don’t worry about property values; if the property value goes down, it doesn’t really matter because you are making money from the cash flow and not the selling of the property. Remember, property investing is a long-term play & more so the largest cash flowing asset in property are Professional and Social HMOs.