Over the years, I’ve found a lot of HMO investors get stuck on whether they should self-manage their properties or hand them off to a local managing agent. This is often because they don’t quite understand what’s all involved with HMO property management.
There’s so much to think about when it comes to managing HMOs. It’s something that will need to be done on an ongoing basis, so whether you’re managing your own portfolio or using an agent, it needs to be done in the right way.
Read about what’s involved with HMO property management and the pros and cons of using an agent below or listen to the full episode on The HMO Podcast.
We’ll also include some tips to help you make an informed decision about what is right for you and your HMO business!
What’s Involved with HMO Property Management?
Whether it ends up being you or your agent undertaking the management of your properties, here are 11 things that have to be done consistently to ensure your HMOs are managed efficiently and profitably!
1. Be a Local Expert
So first and foremost, someone needs to be a local expert, so they can understand what’s happening in the HMO market, know how to set the rents, and be aware of what the competition is doing. Someone also should establish and maintain relationships with local tradespeople.
2. Advertising Rooms
Marketing rooms and properties and managing the adverts and enquiries is a key part of HMO property management. This needs a lot of attention, especially as enquiries should be responded to within 30 minutes. You can’t leave things for a few days. The risk of doing that is that prospective tenants will enquire elsewhere and take up other rooms.
3. Keeping Up with Compliance
When it comes to HMOs, someone has to be responsible for keeping you and your property compliant. There are so many certificates that need to be maintained, and they don’t all fall at the same time. Almost every other month, you’re going to be doing something just for the compliance of one property. And if you get this wrong, it can lead to big fines and liabilities!
4. Screening Tenants
Someone also needs to be on hand to screen prospective tenants and undertake reference checks and a vetting process before anyone can actually become tenants, and that naturally takes time to do effectively.
5. Processing Deposits and Tenancies
Processing deposits and tenancies involve the transfer of money, lots of paperwork, getting signatures, chasing guarantors, putting other documents in place, getting prescribed information, and making sure that the right certificates are issued for the tenancy. And this all needs to be pieced together in the right way.
6. Processing Inventories
Undertaking and issuing new tenants with inventories is another time-consuming exercise. You’ll also need to get it agreed upon by the tenants. By doing this, it means that when tenants move out, you have a benchmark in place to check if their room or any furniture has been damaged.
7. Collecting the Rent
This is not just about collecting the rent but also setting up standing orders, reconciling the rent, and chasing rent payments. Systems and processes need to be in place for this to be done swiftly and accurately. You can’t just assume that all your tenants will pay rent on time because that’s not the case.
8. Managing Tenants
There’s a lot involved with tenant management. Tenants need us for lots of different things as all sorts of questions and issues pop up. How will you or your agent go about managing tenants? Sometimes you need to be on hand pretty quickly to resolve certain issues or answer questions tenants have.
9. Managing Maintenance
You also need to have a system in place on how you or the agent will manage maintenance in a quick and efficient manner. Repair jobs also need to be chased, checked on, and progressed, and the more houses you have and the older those houses get, the more maintenance you or your agent will have to manage.
10. Undertaking Inspections
Regular inspections need to be undertaken of HMOs, whether it’s monthly, quarterly, or whatever time frame you decide. It’s not just about undertaking the inspection but also assessing the inspection report and actioning anything that comes out of it.
11. Managing Evictions
Unfortunately, some tenants will not be suitable to stay in your properties, and you will need to evict them. So, you or your agent will need to go through the eviction process, which can be quite stressful!
Pros of Using a Managing Agent
There are loads of considerations that need to be made when it comes to HMO property management. All of these ongoing activities take up a lot of time and energy, and it can be quite overwhelming when you look at the responsibility involved.
This is why outsourcing the management to a local agent makes a lot of sense for many people. In fact, when you list all of the different things involved, it almost sounds like a no-brainer.
Cons of Using a Managing Agent
The big con of using an agent is the cost involved. Most managing agents will separate their fees into tenant find fees, ongoing monthly management fees, and then additions for maintenance. A typical tenant finds fee could be anywhere between 50% and 100% (plus VAT) of the first month’s rent.
A standard management rate is often anywhere between 8% and 15% (plus VAT) with student lets on the cheaper end and professional lets on the more expensive end. On top of that, maintenance is typically charged at 15% on any item. If you’re trying to replace your income or scale up quickly, that’s a lot of cash, so you need to effectively weigh up the pros and cons.
Tips for Helping You Decide
There’s no right or wrong answer about whether you should self-manage or use an agent. This really boils down to your aspirations, objectives, abilities, time, and resources. It’s a tough decision to make, so here are a few tips and words of caution before you ultimately make your decision.
1. Start as you mean to go on.
If you plan to eventually self-manage your own portfolio because you see it makes economic sense, then I would urge you to start that process now. Learn the ropes, get help where you need it, and develop your confidence with HMO property management. This will make it easier for you to grow into that role.
2. Be super realistic about the cost involved (not just financially).
You need to be realistic about what the real cost of self-managing is to you. Consider the time you’ll have to give to managing a property or portfolio. There’s a lot to do on an ongoing basis. On some days, things will come up out of the blue and disrupt your holiday, your child’s birthday, or an anniversary. That’s the reality of it.
3. Don’t underestimate how difficult managing HMOs is.
HMO property management can be super tough. There are some really technical items and legalities involved. You may have to deal with challenging circumstances or demanding tenants. Because of this, it’s not just about the time it takes up but the stress, anxiety, and frustration involved with having to deal with these things.
4. Be aware of the severity of getting things wrong.
It can be so easy to get HMO property management wrong. If you get the compliance wrong, you could end up in a real heap of bother. If you get the management of your tenants wrong, your property could end up not making anywhere near what it should be.
If you don’t have the time to manage your enquiries or do the viewings, you’ll end up with empty rooms. And if you don’t have the right systems and processes in place, you’ll miss important things, which will impact the success of your HMO portfolio.
It’s Your Turn to Decide
Now I’m going to leave you to make this decision on your own! Personally, I started out by using a managing agent. But over the years, I took them back as I built my own management agency around my portfolio.
If I didn’t have my management business, I would be outsourcing it, because my ultimate objective is to build a portfolio of assets that generate an income so that I can enjoy my time and have freedom of choice. But this depends on your own personal goals.
If you want additional details on everything related to HMO property management and advice on how to level up your portfolio or business, become a member of The HMO Roadmap now!
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!