21 ROOMS HMO

by Readers Question

12:32 PM, 14th May 2014
About 6 years ago

21 ROOMS HMO

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21 ROOMS HMO

I am about to by a HMO property with 21 rooms to let in London. 21 Rooms HMO

My questions are ………..

1) How difficult is it to run a large size of HMO and what difficulties should I expect along the way?

2) Has anyone had any experience of HMO of this magnitude.

I am thankful for any advice/information regarding this.

Regards

Reza

 



Comments

Mark Alexander

12:35 PM, 14th May 2014
About 6 years ago

Hi Reza

It concerns me that you are asking these questions after having already made a decision to purchase - cart before horse?

If in doubt back out or at the very least find yourself an established management company.

I wish you well but remain concerned for you.
.

Jeremy Smith

13:21 PM, 14th May 2014
About 6 years ago

When some landlords in Cambridge squeeze 6 rooms out of a 3 bed semi, perhaps 21 rooms isn't such a big house, and perhaps the sellers have included a cupboard or 3 in that number.

Even so, 21 tenants seems alot to handle, and the first thing I would do is speak at length with the council to make sure everything is in order with the arrangement, if you haven't already done so.

Mark's suggestion of an experienced management company here seems a very good one, you should be getting a very good income from 21 rooms, so plenty of scope to employ an agent.

Peter Hindley

13:27 PM, 14th May 2014
About 6 years ago

If I remember correctly Arsh Ellahi has a 23 bed HMO in the West Midlands. Google him as I am not sure he is on here. He is in Bolton today and tomorrow though at the Landlord & Letting Show. He only deals with LHA tenants.

Mark Alexander

13:34 PM, 14th May 2014
About 6 years ago

Reply to the comment left by "Peter Hindley" at "14/05/2014 - 13:27":

Hi Peter

If you know him, why not invite him to become a member?

See >>> http://www.property118.com/membership/40048/

It's free 🙂
.

Peter Hindley

13:45 PM, 14th May 2014
About 6 years ago

Hi Mark
I've only heard him talk at property meetings 3 times on the circuit & just exchanged pleasantries. I don't feel that it is enough contact really.
Regards
Peter

Mark Alexander

14:18 PM, 14th May 2014
About 6 years ago

Reply to the comment left by "Peter Hindley" at "14/05/2014 - 13:45":

OK, thanks anyway.
.

Yvonne B.

12:22 PM, 15th May 2014
About 6 years ago

Hi,

I have an 11 bedroom HMO along with over 100 other small flats, studios, 1 beds. The 11 bed HMO gives me the least trouble of them all.
It all depends on the size of the rooms, how it's laid out, etc - so it's difficult to tell you exactly how to do it.

Ideally you need working tenants as they will respect your property, the other tenants & the neighbours. Many working people need this type of property because it is so expensive to live in your own flat with all the bills, etc.
However, you must think what YOU would want in their position. If you had to live in a bedsit with lots of other people due to money constraints - what would make it worthwhile?
1) You will need quite a few kitchens, so make sure there is maybe 1 on each floor and they are fabulous, clean, with a breakfast bar so they can sit & eat. Explain to the tenants on that floor that the kitchen is just for them, they need to clean after each use and they are not to go using the other kitchens. Put some small stickers on the doors with their room numbers on so they know what's theirs to use.
2) Bathrooms - same as kitchens - don't forget this is not a place somebody is putting up with for a week like a cheap hotel - make it really nice, like how you would want yours at home, make sure it's warm and clean and inviting.
3) Heating system - keep the boiler in a locked cupboard and set it for the coldest times of the day to be heated - or like you would do at home. Change the setting maybe 4 or 5 times a year as the weather changes.
4)Internet - provide a wireless internet that works throughout the house - who can live without it?
5) Living rooms, you'll probably need 2 or 3 for them to share. Put in Sky TV full package multiroom so it's in all the living-rooms, Sky sports, etc - the men will surely be happy if they can have the football on!
6) Pay a cleaner to go around at least once a week, hoover all the shared hallways, clean all the bathrooms and kitchens (including ovens) and put rubbish out, etc. Never rely on the tenants doing this! Include it in your rent pricing. That way you know that when you do a viewing on a room, the whole house will look clean & tidy and you are more likely to rent that room.
7) Keep the rents competitive against other landlords to keep your good tenants in your house. Over time you'll get a good crowd in who love it and are happy they have some money left from their wages to enjoy life - they won't want to leave. A lower than market rent also means tenants are more likely to pay on time as they don't want to lose their tenancy - knowing it will cost much more if they have to move.
8) Always look after the tenants and treat them like your family, they will then respect you and treat you the same - pay their rent on time & be less likely to call you out at 5 in the morning to fix something trivial.
9) You pay ALL the bills and include in the rent - never expect tenants to be able to split bills between them - it will never work!

Don't forget you'll need a HMO licence, the council will help you all the way with your obligations to make it SAFE, ie fire doors, fire alarm system, etc - they will also give you a copy of the regulations which will tell you how many bathrooms & kitchens you need for the number of tenants - so work with them and take their advice - But it's upto you to make it into a HOME.

I call them POSH bedsits and we don't have any trouble renting them.

Good luck - you can do it!
Yvonne

Reza Ansari

23:12 PM, 15th May 2014
About 6 years ago

Dear Yvonne,

Thanks for your practical advice.I am sure this will help me a lot. and i am amazed about the amount of property you have achieved.I have about 7 properties and bank are already cautious lending me for more. are you working with the same bank or different ones. I must admit i have no strategy how to progress with my portfolio.I work by instinct. i do first ,think later.
Regards

Reza

Yvonne B.

10:54 AM, 16th May 2014
About 6 years ago

Hi Reza,

I was buying in 2003/4/5 when prices were rising and banks were throwing money at people so it wasn't hard to get finance - commercial portfolio finance is where you want to be - you can hold multiple properties under 1 commercial loan, I have my portfolio split between 2 commercial providers and you can keep adding property to the loan as your buying.

I'm sure Mark can point you in the direction of finance opportunities.

The golden rule to buying is to do your homework first.
My main rule is ROI - RETURN ON INVESTMENT.

Your investment is the amount of physical cash your laying out at the beginning. (Deposit, fees, required work, furnishings, etc)

Your return is the amount of cash per year you will make over and above all expenses and mortgage payments (calculate mortgage payments at 6% to give you some leeway on rising interest rates).

House 1) If you are laying out £100k and your return is £15k per year that's a 15% return.
House 2) If your laying out £150k and your return is £15k that's a 10% return.
Choose House 1 every time!! This will maximise your return on your available cash.

Work this out for each property you are considering and it will surprise you which ones are the most profitable. It is easy to work out and that's all it takes to get your strategy right.

That's assuming that the capital values of the properties you are considering will rise equally well over time.

This ROI method will ensure you keep a good INCOME while you hold the investment, if there's no income don't bother - a rise in interest rates will wipe you out long before you can benefit from rising capital values.

Hold everything - minimum 10 years or forever - if they're earning good money why would you ever want to sell - just mortgage them up a bit after 10 years to release some cash if you need it. Buying and selling wastes money. If you don't want the hassle when your older just hand the keys to an agent and walk away, you'll still have an income for life.

Yvonne

Mark Alexander

12:52 PM, 16th May 2014
About 6 years ago

Reply to the comment left by "Yvonne B." at "16/05/2014 - 10:54":

Some very good points made here.

Our Landlords Calculator does all the hard work for you and presents the results in a nice simple format - see >>> http://www.property118.com/calculating-rental-yields-and-returns/

A very good broker to help arrange the facilities you are referring to is Mark Edwards - see >>> http://www.property118.com/introducing-mark-edwards/65509/
.
.

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