In the last twelve months those under the illusion that property investing and development is straightforward and risk-free have had a rude awakening due to the sharp increase in borrowing costs. Anyone who assumed that bank base rates would continue at around one per cent or less as they had since 2009 has also been subjected to a reality check.
The consequences for many new property deals to now ‘stack up’ with higher interest rates so that financing can still be obtained, means that a larger deposit is required and/or that the rental income from a property has to be increased.
For those looking to expand their rental portfolios this will likely lead to considering the co-living, HMO and shared accommodation strategies and then deciding which tenant niche will be appropriate for the location. In high value areas such as inner London it has already been quite difficult to do this in the past ten years as yields were steadily reducing, and as such, more creative approaches have been needed for those still wanting to create new HMO units.
Given the above, I found myself heading to Portsmouth to meet up with two astute property entrepreneurs, Matt Baker and Niall Scott, who seem to be still finding commercially viable solutions within today’s more challenging marketplace.
Matt began investing in HMOs in 2016 and then joined up with Niall to do a joint venture on their first project. In 2017 they founded Scott Baker Properties to build a portfolio of BTLs, HMO and co-living properties. With a combined portfolio of over 100 HMO rooms across 15 separate buildings, now worth over £6m, they continue to grow their business.
The business partners were 30 and 32 respectively when they started working together and this is the target demographic of those who live in their properties. As working professionals, they resonated with what working tenants look for in a quality property – which based on their experiences, they felt back then, just didn’t exist in their target locations. As such they saw that there was a huge gap in the market for high quality, well-designed, well-managed co-living HMOs. They knew that if they ticked these boxes, they would attract those with good jobs who would want to rent this type of accommodation.