What tips do experienced HMO landlords give to new investors?
“Create an HMO that you’d live in yourself”
This is the general, generic comment that we hear quite a lot from landlords.
And why not!
It’s a great rule to live by, to develop and operate HMOs to….
I often poll self-managing HMO landlords for their tit-bits of advice once we have completed on their sales.
One recent client gave me these three key points;
1. Maintain the house to a standard that you would want it be to be if you were living in a room in shared house – as that decreases tenant turn and improves occupancy.
2. When refurbing or developing the property spend the money that buys away future maintenance - it works out cheaper and is less hassle even though it’s a little more expensive at the beginning.
3. Location is everything – do your research before buying.
This landlord had not only bought well and developed well but also managed the properties to near full occupancy for nearly a decade and then sold at the peak of the market when the time was right to ‘retire’ from HMOs - as it happens, he’s the sort of person who should be doing a course rather than sitting in the background!
I love the “buy away your maintenance” quote and have seen how this can keep HMOs more manageable and less costly to operate first-hand - notwithstanding the fact that, actually, they become nicer places for the tenants to live in for the long-term too…
I’m this instance, having obviously been to the HMOs in question the landlord “bought down his further maintenance” not just with good quality appliances, furniture and boilers, etc but with additions such as recessed coir matting in every entrance hall (“so even lazy tenants have their feet wiped when they come in”), floors tiles instead of carpets in heavy-use areas and shower board panels in the en-suites which are all designed to stand the test of time and the many occupiers that live there.
Wendy Whittaker-Large of Best Nest in Crewe gave the following sage words to me a while ago…
“My top tip on running HMOs successfully is to understand the nature of the relationship between yourself and your tenant. Whether you are an agent, investor or landlord, you need to have boundaries and also flexibility in that relationship. You neither want to become so indifferent that the tenant feels irrelevant and unimportant nor become their personal heating, cleaning and maintenance slave. I have seen HMO landlords fail because they cannot navigate that tricky line between being the tenant's best friend, and being their master and squire. (Both of which are unreasonable)! There has to be a professional line drawn between yourself and your tenant so that you manage the relationship and expectations effectively. This is the way to keep tenants long term and keep yourself sane!”
Some more great advice from an experienced operator.
Focusing on the people management with respect, tactfully and with experience plays a huge part in operating successful HMOs - it’s a people business Wendy was essentially saying.
But back to the opening comment, and the bit of advice we hear the most..
“Create an HMO that you’d live in yourself….”
It wasn’t until recently when a landlord improved this statement and, unknowingly, created an anecdote that I’ll be using over and over again.
Wait for it….
“I feel it’s important to create an HMO that I’d live in myself, if I was in the same circumstance as the tenant…” she said.
With just the simple addition of “if I was in the same circumstance” this statement can now be ubiquitous and apply to so many more HMOs and situations.
A light bulb went off for me, anyway!
Developing HMOs, contrary to what you see on Facebook, Instagram or on courses, isn’t about creating high-spec, high-end boutique finishes in all circumstances or conditions.
It’s not a one size fits all sort of thing.
It’s about knowing your market…..properly.
Sticking to the original sentiment “create an HMO that you’d be happy to live” may mean that you’re actually developing a product that’s not appropriate for the tenant type or the proposed use.
It may mean that you over spec (or under spec if you are a sloppy git yourself), over spend, or alienate your target tenants type.
The circumstances and living habits of HMO tenants vary so much across locations and demographics.
Focus on the last part, “if I was in the same circumstance”
This creates a chance to actually consider the tenant you are catering the HMO for and for you to think about what’s the best HMO that you could create for THEM.
If you were a young professional moving near London for the first time, what type of HMO would you want?
If you were an Eastern-European factory worker moving to Doncaster for 2 years, what type of HMO would you want?
A student in Bristol?
Someone coming out of prison looking to get themselves back on your feet?
If you worked in the hospitality industry and came home late from shifts? Or if you worked night shifts…
If you were a vulnerable person?
If you worked away from home Mon-Friday in a different town/city?
You can’t apply the same quote to all of these (and the many more that make up the HMO world) unless you add “if you were in the same circumstances”…
It provides individual thought, tenant empathy and actually makes the developer/landlord think about creating the best HMO possible for the tenants they are appealing to.