Photo by J.O. Property

What would you do if you could start your property investment journey all over again? I often hear people asking this hypothetical question, and it’s a difficult one to answer because it would be different for everyone. It depends on your goals, resources, limitations, priorities, and experience.

But I want to share with you exactly how I would do this! It doesn’t really matter what position you’re in or the amount of money you have to start with. The strategy thought process, and logic behind the approach I’d take can be translatable to your own property businesses.

Read below or listen to the full episode on The HMO Podcast to learn what I would do if I started my property businesses over from scratch and had the good fortune to come back with £100,000 in my pocket!

Year 1

In the first year, I’d start by really understanding my personal objectives. You need to do this before you plan your HMO property investment strategy, including what, where, and how you’ll invest. So, what do you want to achieve and why?

Initially, my focus would be on generating cash flow. This is because I want to achieve financial independence from my job and living expenses. That would then give me scope to free up more time by going part-time or leaving my job entirely.

At this point, I’d also find support and guidance to help me start developing a strategy. It may be helpful to work with a mentor. Personally, that was the single best investment I ever made into my property businesses!

Then, I’d ring-fence about £30,000 to start a HMO rent-to-rent business, which is a low-capital, high-cash flow strategy. I’d use that money to understand R2R thoroughly, get the relevant paperwork and business structure in place, and start taking on deals. 

After investing in this, I’d use the remaining £70,000 to purchase my first HMO, which will ideally be a smaller professional HMO with four to six bedrooms. To buy and develop the property, I may still need to borrow some money either through a private investor or lender. 

I’d really focus on adding value and recycling capital out of the project. Because of this, I’d look for opportunities to extend the property and convert a garage or loft. In all likelihood, I’m going to have to buy in peripheral areas or smaller towns, which are typically more affordable areas to buy.

Additionally, I’d document and share everything that I’m doing and learning on social media, immerse myself in the HMO community, and build my network. This is the best way to get started building a personal and business brand. 

Year 2

With some credibility and experience now behind me, I’d set up an investment and management business to assist other investors in buying, developing, and managing HMOs. You can then charge sourcing, refurbishment, and property management fee. This allows you to get additional revenue into your business without having to duplicate your efforts.

By the time I charge investors these three fees, I could probably earn somewhere between £10,000 and £15,000 per deal. So, if you do just four of those deals, you could have enough to invest in another HMO!

With the HMO property that I already have up and running, I could be making around £1,200 a month from it, and once I’ve recycled some cash out of it, I’d look at getting my second and third projects. But again, I might need more finance from the bank or private investors. 

At the same time, I’d continue to grow my rent-to-rent business by taking on an additional four or five deals. So, by the end of year two, I could feasibly have eight rent-to-rent deals. That could generate between £8,000 and £10,000 per month. But there would be some associated costs, so it wouldn’t all be net income. 

And I’d keep documenting all of this and sharing it online. I’d also begin considering JV partnerships and raising capital for my rent-to-rent business. This can help give you the capital needed to undertake refurbishments and establish the infrastructure to take on more deals, hire staff, implement systems and operations, and develop a marketing strategy.

Year 3

Moving into year three, I’d plan to reinvest as much of my income as I possibly could. It’d be important for me to really start leveraging all my contacts and investor network to work on slightly larger deals. And I’d shift my focus from cash flow to capital. This will start taking me closer to financial freedom and freedom of time and choice. 

Additionally, I’d continue to develop my other streams of income, take on more rent-to-rent deals, do more investment projects for investors, and buy more of my own HMOs. It would also be key to engineer a solution with investors and JV partners where I could fund almost everything that I was buying fully with private capital! 

I’d step up from buying two HMOs in year two to buying three or four in year three. And I’d move towards larger projects of six to 12-bed student HMOs and some commercial to residential projects. 

Student HMOs are more conducive to my longer-term goal of having more freedom of time and choice because managing lots of student HMOs is easier than professional HMOs. I’d also start buying in A1 locations, where my focus is less on recycling capital and more on cash flow and having strong rental confidence.

At the same time, I’d start implementing systems and processes and hiring staff for my rent-to-rent business and investment and management business. This will help give me the time to develop my strategy, build JV partnerships, and scale up my other projects. 

Year 5

Over a five-year period, my objective would be to create £1m worth of equity across all of my property businesses. I’d also set a goal to engineer these so at a minimum I’d be getting a return of 18% on all of my investments and capital that’s invested into those businesses. If I’m able to do that, I could be generating around £15,000 of net cash flow per month!

When I was first getting started, that would’ve sounded impossible, but looking back in retrospect, it’s absolutely possible. So, really what we’re talking about achieving is turning £100k to £1m through the development of value in our business and projects.

I hope this has been helpful and inspired you to go away and think about your property investment plan or how you’d do it if you started over from scratch! Don’t worry too much about the amount of money you have. What’s really important is how you employ what you do have and fill the gaps around what you don’t!

For more resources and lessons on how to start, scale and systemise your property businesses, become a member of The HMO Roadmap today! And to connect with fellow HMO property investors, join our Facebook Group The HMO Community.

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!