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by Simon Zutshi
10:28 AM, 22nd May 2023, About 11 months ago
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As we all know, thanks to the current high-interest rates, purchases of single-let properties don’t really stack up for many investors at the moment.
For those property investors who already own single-let properties on variable rate BTL mortgages, now the monthly mortgage interest can be higher than the rent they receive, despite the rise in rental rates over the last few years, (this is one of the reasons that so many landlords are retiring early this year).
One solution is to repurpose some of your existing single-let properties into higher cash-generating assets by using strategies such as Serviced Accommodation (SA), or Houses of Multiple Occupation (HMO). Which strategy you use will depend on the size and location of your property.
Of course you also need you be aware:
1) Both of these strategies involve more management than single-properties, but you can outsource the management so you don’t have to do it yourself,
2) HMOs are highly regulated and regulation is coming to SAs in England.
The problem with SA regulation is that we don’t quite know for sure exactly what is involved, so there is huge uncertainty around this, whereas with HMOs, we know exactly what is required and it is unlikely to change that much.
That is why my preference is HMOs.
However, a VERY important distinction in my opinion (having operated my first HMO since 1998) is that you can’t just have average HMOs like most landlords, because in most areas there is an oversupply of these standard (or even substandard HMOs).
If you are going to offer HMO accommodation is has to be High End, Co-living HMOs.
The benefit is that you attract a much better type of tenant who is prepared to pay more for better quality accommodation, which means you can make 20% to 30% more rental income than an average HMO, and you have less void periods.
If you already have HMOs, and are not making at least £1000 profit per month pre property, then you should definitely consider upgrading them to High End HMOs.
Another opportunity to acquire property from some of the many retiring landlords and upgrade those into High End HMOs. This could be through traditional purchase, Purchase Lease Option, or even Vendor Finance, which minimises the amount of money you need to put in.
If you want to learn more about how you can increase your cash flow with high end HMOs, come and join me for some live online training about this, in which I will bust many of the myths about HMOs and share my step by step, HMO Success Blueprint, which many of my Property Mastermind students have followed to replace their income in a little as 12 to 24 months.
Register here for this live online training
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