Since we’ve tackled the first 10 steps you need to know to build a successful and sustainable HMO portfolio, in this blog, we’re now going to take a look at the second half of our 20-step process!
To recap, here are the first 10 steps:
1) Goals, Strategy, and Vision
2) Sourcing HMOs
3) Appraising HMOs
4) Planning the Refurbishment
5) Delivering Refurbishments
6) HMO Interior Designs
7) Furniture and Appliance Solutions
8) Certificate Management
9) Utilities, Bills, and Managing All-Inclusive Packages
10) Enquiries and Viewings.
You’ve got your HMO ready and your ads posted on all of the relevant portals. Now you’ve got to fill them up with tenants and start making cash! Jumping off from the 10th step, here’s what you need to know next!
11. Be Prepared
The next one in this process is being prepared to introduce your prospective tenants to your HMO property. This means checking in with them via a reminder text message or a pre-emptive call to make sure the scheduled viewing is still going ahead.
Aside from this, you yourself need to be prepared for the viewing. Remember the key points you need to share as you walk them through the property. A brochure or a pamphlet containing all the relevant information about your HMO can also do wonders. Prospective tenants can take that home and look through it again — leaving your property in their minds even after they’ve done the viewing.
Get to your viewing early, turn the lights on, open the blinds to let natural light in, have a quick clean of the worktops if you need, or get any lazy student tenants out of bed so you can show somebody their room!
12. Referencing and Guarantors
The idea behind the 12th step is that we’re checking for any red flags in our prospective tenant’s financial history. We don’t want to see any CCJ’s against their name and make sure to get at least one landlord reference and insist on a guarantor (even if they have a squeaky clean credit record) because this could save your bacon down the line.
Referencing will make sure you are aware if there’s anything you need to worry about, while guarantors will ensure that your tenants will always make regular payments even if their personal circumstances change.
13. Taking Deposits
Since we can’t 100% guarantee our tenant’s actions in the future (no matter how good the first impression they make on us is) deposits are an essential deterrent to make sure their rent is always paid in full and on time and that their room (or the property) is handed back in tip-top shape.
However, taking a deposit does add some ‘friction’ to the process of a tenant signing up for a new room, and that’s because paying the first month’s rent up front as well as paying a deposit means coughing up a lot of cash!
14. Tenancy Agreements
Because every HMO property is different, tenancy agreements may vary. But in essence, it should dictate the legal terms and conditions of the tenancy, and make sure that you and your prospective tenants are in agreement.
If you already have a tenancy agreement in place, go back and review it so you can refine it. Make sure to cover potential issues in the tenancy agreement to avoid uncertainty later on.
15. Inventories and Inspections
Inventories and inspections might take some time and a whole lot of effort, but it’s an important step because, without them, you can’t reasonably withhold your tenant’s deposit in the event that they do any damage to your property.
When you’re creating a new inventory, remember that it’s a two-way process and that you also have to include your tenants in the process. Distribute the inventory to your tenant(s) once you’ve created it and give them the opportunity to make notes and comments on it. By doing this, you can make sure that both of you are on the same page and that everything is properly accounted for.
16. Managing Your Tenants
As with any type of relationship in business or otherwise, good communication is key to managing tenants. Expectations need to be clear right from the get-go, and you can achieve this by communicating well with your tenants. It’s also important for you to respond to their concerns in a timely manner so you can put their worries to rest.
Having a document like a ‘Welcome Pack’ that you can give to a new tenant will allow you to set out all of the important information your tenant needs to know. You should include information such as how to report maintenance, how a tenant can hand their notice in, and what the cleaning policy is.
17. Mastering Basic Business Financials
You don’t have to be a financial expert, but you do need to have a good grasp of numbers to keep track of your expenses and cash flow. There’s a lot to consider here, but make sure to organise and prepare your finances well to make things easier for you and your accountant. The cleaner your finances are, the easier it will be to build a sustainable HMO property business.
18. Raising Private Finance
There’s only so much finance you can get from the bank, so sometimes, raising private finances is the way to go if you want to scale your HMO property business up.
To do this, you’ve got to start thinking about investor decks and things you can present to potential investors. This isn’t something that can happen overnight because you first have to build and nurture relationships with investors.
Even if you don’t see yourself needing finance in the near future, it’s still a good idea to start working on this step because you never know when you’ll need it or how quickly you’ll need it!
19. Systems
Having systems in place can significantly reduce the amount of legwork you have to do in your HMO property business. There are many types of systems you can use, it just depends on the type of business you’ve got and on how many HMOs you have.
Systems evolve alongside your business growth so you have to keep checking in to see if there’s room for improvement (that’s what being a good business owner is all about, right?). Having a system will help you and your staff run your business smoothly, so this is definitely something you should be thinking about as you build your HMO property business.
20. Staff
Hiring staff you can rely on is absolutely crucial to running and growing your HMO business. From sourcing tenants to the other 19 steps in this process, your staff can help you with everything!
But of course, you can’t just rely on them to do the job as soon as you hire them. You need to train and nurture them so they can better help you achieve your goals. And you have to build the right culture.
So there you go! I hope my 20 steps have got you thinking about what needs to be done and what more you could be doing. But it’s so easy to get lost and overwhelmed with where to start, and that’s why I built The HMO Roadmap membership site to help you do this one step at a time.
For more useful resources and in-depth lessons, 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 the host of The HMO Podcast! Follow Andy on Instagram!