From an Experienced Property Entrepreneur
by Andy Graham
After nearly 20 years investing in property, I’ve learned so much and have faced a ton of trials and tribulations along the way, and there are quite a few things I’d do differently if I started my HMO business over from scratch today!
As host of The HMO Podcast, having established The HMO Community and having run my mentorship programme The HMO FastTrack, I’ve also come across so many incredible investors and seen first-hand how they’ve built and scaled their HMO portfolios.
With that, I’ve learned a lot from fellow investors too and seen what it takes for people to reach and smash their property goals... So, here’s my top advice for new HMO investors, so you can build the portfolio of your dreams!
As any type of property investment is extremely capital-intensive, we need large sums of money to get started buying assets. Then, at the end of a deal, even if you have successfully added value, a lot of that equity gets sucked back in, basically staying as a residual long-term deposit.
When building a HMO portfolio, your capital will continue to get taken up, and it can be really challenging to pull a lot of value out of projects. Prioritising cash flow in your deals can help you bridge that gap as you grow your business.
You could even consider starting a rent-to-rent business, but that isn’t right for everyone. And you can generate cash from all sorts of businesses. Whatever it is, build that up, create a recurring income stream and use that money to invest into your HMO business. Later on, you can then start to prioritise equity over cash flow.
Finance is key at every stage of your HMO investment journey. If you don’t have any or enough finance to get your HMO business off the ground, how will you even be able to get started investing let alone grow a portfolio?
Often, we’re all scraping the barrel to buy properties and undertake refurbishments. This never changes – the goalpost just moves! And naturally, the more finance you have access to, the more deals you can do, and the bigger deals you can secure.
Keep in mind that there are lots of different ways to get finance on the table. So, save, borrow, add value, and recycle cash out of your deals wherever possible. It’ll also be helpful to improve your credit rating as much as possible and get an experienced HMO mortgage broker on your power team.
Lack of time is one of the biggest roadblocks in any business. The more time you have, the more you can do and achieve. So, give yourself time to work on the most important tasks. This can allow you to focus on the activities that will drive your business, including formulating strategies, undertaking income-generating tasks and viewing properties.
You also need to make sure you’re not saying yes to too many things… Don’t get sucked into trying to do too much. Be time conscious with everything you do and make sure you’re always working towards your overarching goals. So, protect your time, maximise your efforts and assess anything you agree to do and how it will impact your time availability.
Personally, I should’ve left work sooner and gone full-time in property. When I did leave work, it made me get out there and make things happen. However, this does not mean you should leave your job right now, but it’s important to understand when the right time is for you.
It’s essential to understand the risks involved before any property purchase, and you also need to know how to mitigate these. Certain risks can fully change the economics of a deal, leave yourself open to major losses or even bankrupt you! This is serious, so spend time finding out how to structure smarter deals.
Become an expert on calculating probabilities and how they could impact your property and business as whole. This includes financial risk from losing capital or income, finding the rents are not covering your costs or receiving a down valuation.
If you manage risk effectively from the start, it’ll be much easier to avoid as you can build mitigations at the front end of deals. So, identify potential risks, plan realistic scenarios around what you’d do if certain things happened and create plans to mitigate them.
Additionally, if you want to raise private finance or utilise HMO mortgages, you’ll need to rely on other people wanting to work with you and being happy to do so. If you don’t make the right decisions or damage trust with investors, lenders, partners or tenants, it could completely destroy your business.
Even after you learn the basics, you need to keep learning and staying informed about the industry and how to better run your business. As a HMO investor, you should be constantly trying to keep taking your knowledge to the next level.
For more insights and lessons, sign up to our online learning platform The HMO Roadmap. And if you’re looking to really scale your HMO business, check out our one-to-one mentorship programme The HMO Fastrack. Visit thehmoroadmap.co.uk for more information.
