When we’re talking about building a successful HMO portfolio, what are we actually talking about?
There is no one right answer to this question because it all depends on what you’re trying to achieve, but there are key steps that you should remember because this will be your guide in building a successful and sustainable HMO business.
Whether you’re getting your first HMO or already have a few under your belt, these 20 steps are still relevant because it covers everything you need to know about HMOs from start to finish.
So without further ado, here are the first 10 steps you should know in building a successful and sustainable HMO portfolio!
1. Goals, Strategy, and Vision
Before you get started with the idea of building a HMO property business, you should first have a clear vision of what you’re trying to achieve. This is where setting goals and having a strategy really helps because these will guide and influence your decisions as you go about building your HMO portfolio.
2. Sourcing HMOs
The ability to source good HMOs is key to the speed and efficiency at which you can build your portfolio. However, this depends on the networks you’ve got and the systems you have in place, as well as how skilled you are in identifying good deals and making sure you can get access to them through various means.
3. Appraising HMOs
Once you’ve sourced your HMO, you need to be able to appraise them! This step is so important but unfortunately, a lot of people have a hard time with this. You have to really understand the data you’re putting into your spreadsheet for the outcome to be as realistic as possible. This means understanding gross and net yields, return on capital, down valuations, and what the appraisal will look like.
4. Planning the refurbishment
This step is important in making sure that the delivery of refurbishments is as close to where you want it to be. You need to understand everything that’s involved in a refurb to be able to plan accordingly, and this includes understanding budgets, contingencies, timeframes, and risks.
Always proceed with caution in the planning stages, but don’t forget to build some risks into it to prepare you for mistakes.
5. Delivering Refurbishments
You’ve reduced the chances of things going wrong by planning the refurbishments, so now it’s time to deliver them! If you’re building your HMO portfolio, then you need to keep pushing refurbs along. Make sure that timelines are achieved and targets are hit by having systems in place.
And it’s not just about managing people and projects, because you also have to understand the financial aspect to make sure you’re not overspending. Once a refurb project begins, you need to give your full attention to it.
6. HMO Interior Designs
This step is so important to make your HMOs stand out amidst a competitive market. It’s where you can make your HMOs look amazing so that they can jump off the page and stop people who are scrolling in their tracks. However, it’s not just about going all out on your designs, because you also have to make sure they’re within your budget and capabilities.
7. Furniture and Appliance Solutions
This step overlaps with the interior design, but you also have to think long term for the furniture and appliance you buy. It’s so easy to skimp on these things when you’re prioritising your budget, but it’s important to take into account their longevity because if you don’t, you’ll be spending more in the future.
While we want a property that looks amazing, you also need to think about its functionality for the sake of your tenants. So what you want is furniture that not only looks good but is also durable, and appliances that are practical and enough for everyone.
8. Certificate Management
This step needs a lot of research because you need to understand what your obligations are. Once you understand what you need to do and what requirements you need to comply with, you can build these into your business.
Set reminders, delegate responsibilities, or maybe even outsource certain processes. Just make sure you don’t miss any of your responsibilities.
9. Utilities, Bills, and Managing All-Inclusive Packages
Managing utilities and bills might sound easy, but this can drastically affect your finances if you don’t have systems in place. It’s so easy for bills to exceed their budget because we can’t control how our tenants use our property. However, if it’s a student property, you can put a fair usage cap that you and your tenants can keep track of.
Overspends can easily add up especially if you have multiple properties under your belt, so having systems in place will help you keep your bills within the budget.
10. Enquiries and Viewings
So you’ve got your HMO looking fantastic, certificates in place, and systems to help you keep on top of your utilities and bills. Now you need tenants to stay in your property, but first, you need to generate viewings.
Once a potential customer shoots you a message, you have to respond quickly to turn that inquiry into a viewing, and that viewing into a tenancy. Communication on demand is becoming a norm so not responding within 30 minutes of the enquiry reduces the chances of converting them into viewings.
So that’s the first half of what you need to know to build a successful HMO portfolio. The steps are an evolving process, but the end goal is to reach long term sustainability in your business. Once you’ve got the basics on point, you can scale your business to an infinite degree. Keep an eye out for the second part of this series for the complete guide to your HMO property business.
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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 the host of The HMO Podcast! Follow Andy on Instagram!