How To Buy Your First HMO Property UK | Money Matters | Touchstone Education


– Now, if you’re looking to
make you’re money work harder, or in fact, if you’re looking to make somebody else’s money work harder then you can do worse than
consider investing in an HMO. (upbeat music) Hello, I’m Paul Smith, and
I hope you are very well. Welcome to this week’s
edition of Money Matters because after all, money does matter. What, I hear you ask, is an HMO? Well, an HMO is typically a regular house, could be a flat, and it’s where you’re not letting the property
by the month to a family, you let in a room by the week, typically, to individual, maybe a couple. And they want they want
the bills included, gas water, electric, wifi, council tax, so you’re getting a
flat rate for the room. So if you like the idea of
maybe increasing your cash flow, but still just buying normal properties, how can you do it? Let’s have a look first
at why you would do that. Well, let me give you some real numbers. We’re just buying one at the
moment here in Doncaster. I could give you all sorts of figures. I’m gonna give you the easy figures from where we operate
because that’s what I know. We are buying a three bedroom, three bedroom, two
reception terraced property. Now, there’s all sorts
of rules and regulations that came in in October 2018 that made investing in HMOs more difficult. If it’s got five or more
bedrooms in England and Wales. Scotland, three. Which means in England and Wales, you wanna get your first one, get one with 4 bedroom. Now, why am I buying
a three bedroom house, and I’m gonna use it
as a four bedroom HMO? Well, I’ve got four bedroom, sorry, I’ve got three bedrooms, but then I’ve got a lounge and a dining room. So I can have the three
bedrooms as bedrooms, and then I can use one of
the downstairs rooms as, one of the reception
rooms, as another bedroom which is fine because the
kitchen’s nice and big, they can share the kitchen, on top of that, we’ve
got an upstairs bathroom, and in addition to that, there’s a downstairs toilet. For four people, that’s good, isn’t it? Four people sharing a
house, sharing the kitchen, sharing like a public room, a lounge, so they can all watch TV together or whatever else they wanna do. Chat and whatever, catch up. And then, okay there’s only one bathroom, but at least there’s two toilets so it shouldn’t be too
congested of a morning. How much does all this cost, Paul? Well, the offered we had accepted on this particular property is 65 thousand pounds. Now, okay that’s a good deal. But let’s say even that you paid 70 or 80 thousand pounds, which is probably more like
what we should’ve paid, but we’ve been doing this a while and we got good networks and whatever. We know how to get
properties direct to vendor, but let’s say for the sake of this example that you spend 80 thousand pounds, but you get a four bed HMO. Now, this particular property, if it was let as a single let, you’d be getting 550 pounds a month. And if you do the figures based on, say you bought it for 80, say you got a 60 thousand mortgage, say it was 2%, 60 thousand
pound buy-to-let mortgage, well 2% of 60 thousand
is 12 hundred pounds. 12 hundred pounds a year
divided by 12 months is 100 pound a month, so
you can do the figures. It works all day long as a buy-to-let, but if you take the same property and instead of renting it out for a few hundred pounds
per month to a family, or something, you let
the individuals rooms out for 80 to 85 pounds a week, what do the numbers look like now? Get a piece of paper, write it down. So if you got 80, let’s be conservative, 80 pounds a week times four is 320 quid. Four eighths of 32, so
four times 80 is 320. 320 times four, ’cause you got four weeks in a month, is 1280. Oh, that’s a lot of money, isn’t it? But it gets actually a
little bit better than that because there aren’t
four weeks in a month, there’s 4.2 weeks in a month. ‘Cause as you know, I’m sure
some months have got weeks, and some weeks, some months have got five. The average through the year, it’s 4.2. So you got 1280, but if we add on the .2, you’re actually closer to 1350. So instead of getting a rent of five, 600, you’re now getting a
rent of 13, 14 hundred. But you gotta pay the utilities. You gotta pay the wifi, you
gotta pay the council tax. Now, add those all
together, you’re talking 300 quid a month for a property like that. So take your 1350, take
off 300 quid for utilities, you’re back down to 1050. What else do you got
to make allowances for? Well, what we do is we like to keep all of our properties in tip top condition, so we allow 25% for let in fees, for our agent’s fees, for
voids, for maintenance, for all of this stuff, so let’s drop the 50 quid, let’s say the 50 quid
covers your insurance. So you’ve now got 1000 pounds, take off 25%, so it takes you to 750, now take off your 100 pound mortgage, it’s 650 pounds per month
profit after all costs. On a 65 to 80 thousand pound property. You can’t do that with a single let. So the returns are much higher. So if your first HMO,
I’ll be saying something different if you’re an
experienced investor. I’d be saying get a bigger HMO because it’s more efficient, and more of that on another day. This is just to get you looking at your very first HMO. You’re gonna avoid having to comply completely with the vast majority of the HMO regulations if
you’ve only got four rooms. You still need to keep an eye out for local authority council requirements like minimum room sizes
and stuff like that, but essentially, if you come and do a two day course with us, we can teach you the ins and
outs of how to do all this, and very quickly you can be buying houses to turn into four
bedroom HMOs with zero spent. Now, if you add to that the
little twist of if you buy it for 65, but get it
revalued up to 80, 85, you can pull your money out, so we can do this and
get all of our money out, and I can teach you how to do that too. And the final thing I’d
say to you is to make sure you’re not clobbered
by all the anti-landlord legislation, don’t buy
it in your own name, set up a limited company, we can teach you how to do that as well, and buy your HMO in a limited company. So to summarize my top
tips for your first HMO, number one, make sure it’s
an affordable property, number two, make sure you’ve got somebody really good to manage it for you, number three, make sure that you’ve got a basic understanding of the ins and outs of both national HMO regulations,
but also the local stuff, and a couple of days
will kill that for you. Number four, do a limited company, and fifth, enjoy because if you can start picking up properties
where you can recycle your money out and make 600 pound a month, how many of those do you need for complete and absolute financial freedom? Five? Three grand a month profit? 10? Six thousand pound a month profit? 20? 12 thousand pound a month profit? You get the right training, you get the right support, you get the right education, come check us out at Touchstone, come and see us. Come on one of our free courses, just come and check us out. Do a webinar with us. Learn how to do this. Most people, right
application, right knowledge, right support, completely and absolutely financially free within a year. If that sounds good, I’ll love to work with you on it. You’ve been wonderful, I’ve been Paul. See you very soon, bye.

5 thoughts on “How To Buy Your First HMO Property UK | Money Matters | Touchstone Education”

  1. Hi, nice video again, some people say it's not worth doing a 5 bed hmo because if you pay for licence then you should go for 6 minimum instead, would you agree with that?

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