Top 3 Mistakes First Time HMO Owners Make


mistakes of hmo investors, hmo investing mistakes to avoid, hmo taxes, hmo property investing


To the untrained eye, HMOs may seem like a foolproof investment plan. To a great extent, it really is a wonderful real estate investment plan. Think about it, you are buying a piece of property that will keep bringing in cash for as long as it is standing and provided you keep it in good working order. What could go wrong?

As it turns out, quite a bit. Many people assume investing in property will bring in money without actually thinking about HOW the property will make them money. If you like attending a lot of networking events like me (I’ve attended Simon Zutshi events, John lee events and Rick Otton events) to name a few, then you will know that the “How To” part is something these property investing gurus all like to stress.

In my case, I’d like to stress on what not to do. Here are the top 3 mistakes HMO investing newbies make.


Assuming that the tenants will always come

One of the biggest misconceptions about HMOs is that you will always have paying tenants. There was a time in history when all you had to do was build it and they would come. That time is long gone. Nowadays, you have to first find out what it is they want, build it, then put in an incredible amount of effort trying to convince them that it really is what they wanted in the first place. Just because you bought your first HMO does not guarantee you rental income for years to come. There is a lot that goes into attracting clients and even more than goes into attracting the right tenants. Once you have done that, you still have to do a lot more to retain those tenants. Assuming that your job as an HMO owner is done simply because you bought the place is a big mistake that will end up costing you as far as the occupancy rate is concerned.


Being ignorant of associated taxes

Did you know that you need to pay tax on the rental income you receive that is above the £10,600 personal allowance threshold? Did you also know that from April 2017, your mortgage interest tax relief will be slowly reduced to 20% maximum of the basic tax rate? Further, yet, did you know that the 10% ‘wear and tear’ allowance that landlords currently enjoy is going to be scraped off in the next few years? These are all things that you should be aware of as a new HMO landlord. The associated mortgage interest repayments represent the biggest cost when you intend to buy an HMO. These are all things that you need to budget for before you find yourself in hefty fines or even possible jail time courtesy of the taxman.


Not taking the location into consideration

mistakes of hmo investors, hmo investing mistakes to avoid, hmo taxes, hmo property investing

Hard to get tenants in a bad neighbourhood.


It is only natural that we would try and buy the kind of HMO property that would not clean us out as far as bank accounts are concerned. But just because you got a good deal on a piece of property does not necessarily mean that you will make money from it. One of the most sensitive issues when it comes to choosing an HMO is the location. You need to buy your property somewhere with great traffic, schooling population, great transportation, favourable local tax requirements and so on. Not taking all this into consideration is a sure-fire way for you to get burned.

From not choosing the right kind of tenants to not charging the right amount for rent, there are some mistakes that every new HMO owner will be prone to making. If you want to start your business off on the right foot, you will do well to avoid the above-mentioned ones.

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