Before we buy any HMO properties, we should be thinking about how to future proof each of our investments. But it can be difficult to know exactly how to do this.
If you’re feeling lost, don’t worry. In this blog, we’re going to provide 10 easy solutions for you to start building this into your HMO business right now, and if you want to hear everything Andy has to say on the topic, you can listen to the full episode on The HMO Podcast.
The Importance of Future Proofing
Running a successful HMO portfolio is all about making sure it works today, tomorrow, next year, in five years, and 10 years down the road. We want to make sure we have a long-term view with everything we’re trying to achieve.
If we don’t get this right, it could cost us a lot of money, time and heartache. In a worst-case scenario, we could find an investment simply doesn’t work in the future. However, by doing a few simple things right now, we can make sure that our properties are future proofed and generate recurring income for years to come.
How to Future Proof Your HMO Portfolio
Here are 10 areas to think about to future proof your HMO portfolio or business. These can’t be accomplished all at once, but this list can help you start implementing future proofing solutions into your business moving forward.
1. Finance and Stress Test
For starters, make sure every deal is right in the first place. Stress test your deals thoroughly before making any purchases. Don’t compromise on anything, and don’t let the emotion of buying a property carry you away.
Prepare for different scenarios, such as an increase in interest rates or your utility bills. Then over time, you can build up a cash cushion to better respond to any problems that come your way.
Don’t be afraid to re-negotiate the deal to give you more margin if necessary. This helps ensure that you won’t start to erode the profitability of your HMO portfolio and remember, ‘you make your money when you buy’.
2. Prioritise Location
Ensure that you are investing in a location where your target tenant demographic is in abundance. The more prospective tenants in that area, the better chance you have of continuing to fill your property in the long term.
The further away you go from the core supply of tenants, the less you are future proofing your portfolio. It’s not an exact science, but be aware that location is critical when it comes to the long-term performance of your HMO portfolio. You can learn about this in detail inside The HMO Roadmap.
3. Operate Your Portfolio Like a Business
Often, we look at each property we own separately. But we should look at the sustainability and performance of our entire HMO portfolio. Consider costs, profit and loss and the procedures and systems in place for your entire property business.
When building a HMO portfolio, run it as a business. This also means you’ll need to make decisions like a business owner. And you’ll likely have to make some tough decisions along the way.
4. Know Your Liabilities and Legislation
As HMO landlords, we need to thoroughly understand our liabilities and the legislation. It can be boring, and there’s a lot of different legislative policies to be aware of. But one way or another, you need to know these.
If you don’t, you will be liable for anything that may happen in your property, so do your research and keep up to date with any changes. First and foremost, we need to keep our tenants safe. And secondly, we must keep our property safe.
5. Stay Ahead of the Curve
The HMO market moves quickly, and as more people are entering the sector, this could make it more difficult to keep properties filled. Because of this, it’s especially important to look for ways to get ahead of the competition and improve your product.
We need to keep up with the current market trends, what our customers want and what they place value on. If we do that, we’ll retain a slight edge over our competition and be more profitable
6. Use Durable Materials
Use high-quality materials and robust furniture, fixtures and fittings that will stand the test of time. If you buy cheap materials and products, there’s a good chance that they’ll start to fail sooner, and that’ll actually cost you more in the long run.
7. Provide a Superior Management Service
Put systems and processes in place for effective property and tenant management. If you’re outsourcing this, hire a property manager with the same values and objectives as you, who will make sure your tenants are happy and that your property is always full.
Keeping your tenants happy is so important as happy tenants usually pay their rent and stay longer in their rental properties, and that will keep your business more profitable.
8. Periodic Inspections and Improvements
It’s essential to keep your properties in tip top shape. Making improvements can help you maintain a high spec and ensure your property doesn’t fall behind the competition.
Undertaking periodic inspections also allows you to spot any maintenance issues and can show tenants you care. Additionally, it gives you the opportunity to ensure your tenants are keeping the property in good condition and complying with their tenancy agreement.
9. Have a Long-Term View
Investing in HMOs is all about thinking long-term. If we make decisions that only serve us in the short term, then it’ll be difficult to sustain profitability.
If you’re buying the right properties in the right locations and doing the right things, there’s a good chance that you’ll earn capital appreciation over time. However, trying to reach long-term goals too quickly often leads to problems. Sometimes you need to slow down to achieve your long-term objectives sooner.
10. Nurture Contacts and Relationships
So much of what we can achieve as HMO property investors will happen through the contacts and relationships we build. Place value on the contacts and relationships you have, even if you’re not doing business with them right now.
It can be easy to get frustrated, especially when deals fall through, but some of these conversations that go nowhere right now could turn into something down the road.
So those are the 10 of the ways to future proof your HMO portfolio! Hopefully your properties continue to work for years to come without having to make any changes or having to invest significant amounts of money back into your portfolio to keep them profitable.
For more step-by-step advice and resources on how to start, scale and systemise your HMO portfolio, join The HMO Roadmap today!
About the Author:
Andy Graham is the founder and the lead trainer at The HMO Roadmap! He is also the co-founder of The HMO Mastermind and Smart Property, a specialist HMO property investment and management company. He writes as a regular columnist in different magazines about a variety of HMO topics and is the host of The HMO Podcast! Follow Andy on Instagram!