By far, one of the most lucrative sectors of the housing market, HMO or buy-to-let housing can make or break your fortunes as a property investor. The thing is, there are thousands of investors in the UK and around the world who are enjoying incredible profits from simple HMO investments they made years ago. These people are seeing a continuous growth in their property income year in and year out while other are making unmitigated losses.
Whereas not every landlord will make astonishing profits from their HMO investments, there are ways through which you can avoid making the most common mistakes that these landlords make. You can give yourself the best chance to make continuous profit as well by avoiding these mistakes.
Buying the wrong property for all the wrong reasons
This is the very first thing you should be concerned about as a property investor. Not all properties are created equal. Just because you bought it does not mean that you can sell it at a profit. If you buy property that no one wants to live in, it will not matter for how low a price you got it. You will still make a loss.
How to avoid making this mistake: For starters, you need to be prepared to pay a bit more for properties located in prime areas. The biggest factor that should go into this is – what kind of clients and income do you want to attract? If you want top notch, million pound rental income each year, you cannot buy rundown properties in a ‘dead’ part of the country. Take your time to find the right property. Run some research on the general rental income history of the place to determine what kind of potential it has and then, only when satisfied, should you buy it.
I have mentioned property investors’ networks before like PIN Meetings (Simon Zutshi) and We Buy Houses Community Meetups (Rick Otton) before, and I don’t mind mentioning them again. Networking events are one of the best places to fish for info because you get to meet investors that have done deals in locations you may want to look at. While researching using the internet is always helpful, getting insight from a fellow investor face to face is still gold in my view.
Not properly managing your income
But as we all know, sometimes, things may not go as planned and some of your tenants may not have their rent ready when it is due. In these kinds of cases, you have to options. You either hire a letting agent who is given the mandate to resolve these matters in an appropriate manner or you practice a firm hand if you are a DIY landlord.
Solution: Sometimes, no matter how firm your stance is on late rent payment, there still may be some cases of this happening. The best course of action here is to take out a ‘rent guarantee insurance’. It will cost you something like £50 but it will give you peace of mind and a guarantee that you will have your rent on time.
Not finding the right tenant
In a bid to avoid vacant rooms, many landlords often settle for any tenant they can get. This can be a huge mistake. What you want is a stable tenant who pays rent on time. You want someone who will take care of the property and respect the signed agreement. These kinds of tenants may not be so easy to come by on a day to day basis. It means doing your research and vetting everyone who applies. Sometimes, it may even mean using an agency to find you the right tenants.
Solution: Don’t be in such a hurry to get tenants. Take the time, use the right channels to find the right tenants.
By properly managing your property and taking care of your tenants, they will, in turn, take care of you. As we all know, sometimes tenants move on. When this time comes, an appreciative tenant will even recommend your property to friends and family. Treat this as a personal business and be very diligent in how you relate with your tenants. This is how you make profits and avoid the common HMO mistakes that cost money.