Imagine the scene: you’ve decided to take the leap and invest in your very first HMO. It’s the day of the viewing and you’re assessing the potential of a rather sorry looking run-down property. You’re assuming the internal sizing gives it Tardis-like proportions, as from the outside you can’t quite believe that this house has the potential to be a six bed HMO. The three bedrooms and three reception rooms certainly offer that potential in theory, and if the floor plans are accurate it certainly looks possible, but you wonder whether you can make it reality.
The windows and doors are UPVC (tick), the roof looks in reasonable condition (tick) and there’s no sign of damp or subsidence (tick). In the local area, there’s a small corner shop down the road and a couple of buildings have already been converted into flats. A few bins are just sitting on the pavement, not looking as if they belong to any one house in particular, and there’s a faint noise of a radio drifting onto the street.
A perfect location for an HMO!
The estate agent turns up in a smart suit and opens up. A not-lived-in sort of a smell emanates from the rooms as you try taking in every detail. You start to employ your Kirtsie Allsop sense of possibility thinking, and it engages a delicious part of your brain.
Could this be a six bed HMO? How would the kitchen be arranged? Will the dimensions meet all the regulations? What will the cost of the refurb be? How much money could I make? Will the market be as busy when I complete the refurb? How long will it take to rent my rooms?
As you complete the viewing, you’re feeling a mixture of excitement and nerves. You’ve done your market due diligence and you know what the potential is. But there are so many unknowns - interest rates, lending, exit valuations, energy prices…should you jump now or wait until the economy settles down?
Having started investing in shared student housing in 1996 (and yes I was just about old enough to do it then), I can say that I had exactly the same hopes and fears that our viewer above, faced - and that was nearly 30 years ago.
