There are those who believe they can simply source and refurb their own HMOs. More so, there are those that believe they can do it from a distance. I can say first hand, much easier said than done. We always have issues to over come. If it means bringing power to a HMO or sorting out major water issues with United Utilities in Manchester. Builders get busy on multiple jobs and works slow down. Slowed down works cost time and money.
Then there are those who we look to supply….We sell ready made HMOs both Professional HMOs and Social Housing HMOs. Luckily we have building regs on all properties. This assures the buyers of the quality of the works and has passed the inspections of the appropriate councils. More so, with the Social Housing HMOs, they go through a rigorous inspection. Room sizes are verified with dampness checks to electrical and plumbing. This is an issue that needs to be checked when buying a property. More so, we encourage our buyers to have a survey.
If you don’t know the nature of the refurbishment, you should. A basic list of the scope items on the renovation helps you as the investor understand what the outcome of the house will be. What types of finishes are used and what will be completed in terms of things like roofs or windows? What types of materials are used? All of these things will factor into how desirable the property will be, the rents it will command, and the period of time you’ll have before needing to repair or replace the various items in the house. Are there mostly hard surfaces on the flooring? If there’s carpet, how often does it usually need to be replaced?
Our social housing HMOs are on 5 year contracts with maintenance covered up to 5,000 per year so that is a big savings.
Besides the refurbishment….You need to check the rental yields and management. Regarding the rental yields, the whole concept of HMOs are increased yields than simply buy to let. It is shocking however when we have investors who approach us to buy property and can not understand a basic not done up property might generate in Salford 6,000 a year gross…and cost now about 100,000. The net number probably is pushing closer to 4,000 due to voids and maintenance. We have had investors balk and say…why should I pay you X for your hmo…as I checked the land registry. They do not realize that we might have invested close to 50,000 and that we generate 23,000 versus their potential 6,000.
There fore do your homework….Look at comparable HMOs…what they rent for…and take into account expenses of approx 25%.
Regarding the management company, Learn how they communicate with both their tenants and their owners. How will the company communicate if something costly or difficult happens? Have a clear understanding of the costs that are charged to you on a monthly basis, such as tenant placement and monthly management fees. Also ask if there are other fees outside the main monthly management and placement fees and if there is a schedule on how that is billed and what you are responsible for.
Property is alot of work. Too many underestimate that and end up paying the price.
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