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Article > HMO's - What and Why

 

Article kindly provided by

Paul Preston

www.TheHMOGuy.com


What is an HMO

In this, the first of my series of articles about HMO’s and Multi-Lets, I thought it was best to start with the basics, so ‘exactly’ what is an HMO?

HMO stands for House in Multiple Occupation. In essence it does what it say on the tin, it’s one house with multiple different occupants (i.e. un-related tenants)…..also known as a HiMO (‘i’ for in), multi-let or a house share.

A property in generally considered (by the Council) to be an HMO if it has 3 or more tenants forming 2 or more households. For example, 2 brothers and one sister all living together, all paying their separate share is 3 tenants, but because they are all related, they are 1 household, so ‘not’ an HMO. However, 3 recent graduates/friends who decide to pool resources a get a place together, in theory, 3 separate and un-related tenants – this is an HMO.

Now, without getting into the ‘yes but’ debate here – as it could be argued that the 3 graduates arrived as a ‘single unit’ – what we’re really focussing on is not the ‘accidental’ HMO’s (ie they genuinely didn’t realise it was or had become an HMO), but the HMO’s we talking about are the ones we deliberately want to do, not the accidental ones.

Such HMO’s have a specific identity in law (namely planning law) and are categorised as Class C4 HMO’s, which means 3-6 sharers. Above 6, it can still be an HMO, but it goes into a different planning calls called ‘suis generis’, a Latin term meaning ‘of it’s own kind’. A normal residential home (eg your house or mine) is a Class C3 Residential Dwelling.

Now that’s the ‘technical’ bit over and that’s as complicated as we’re going to get in this series of articles.

Why Do HMO’s?

So, now we know ‘what’ an HMO is, ‘why’ do you want to do HMO’s? The short answer is because of the MASSIVE cash flow they can generate. With the right model in place, you can literally retire on just one property and in my humble opinion, you ‘MUST’ - be using HMO’s as a key part of your property strategy.

HMO’s create LIFE CHANGING income. I’m not talking about £50-£100 per month here and there, I’m talking about substantial income, about £1,000 - £2,000 per month CLEAR PROFIT on every property! Some of my HMO’s produce 20 times the profit of some of my single lets, and with that type of income, you only need 1 good HMO property to effectively retire!

Let’s look a this is little closer – the average salary in the UK is around £22,000 a year, so if you have one HMO that cashflows £1,800 per month (for example), this is £21,600pa… which give or take the pennies equates to the average salary in the UK, on just one property! On top of that, using my Secret Strategies to literally make money out of thin air (which I’ll cover in a future article), you can easily add a further £4,600 on this same example property, pushing the income to £26,200, which is 20% more than the average UK salary! Not bad for one house!

Now think of it in these terms, and I’m going to work to round numbers here, but if each HMO property makes you a clear £20,000 a year profit, how many do you need?....then how many do you want? The lifestyle that these properties can help you create is nothing short of astonishing. Imagine this, 3 HMO’s, £60,000 a year income, working literally a couple of hours a week. Think about what you’d do when you not only have the income, but you also have your time back!

I can honestly say that my life has changed since I did my first HMO and I’ve never looked back. Yes, I’ve made some mistakes and yes I’ve worked hard to make my model better and better over the years – it used to ‘only’ be £1,000 profit, per property, per month! – but now each HMO I buy will deliver me around £20,000 a year profit.

So, now you know ‘why’ you want to do HMO’s! – because of the lifestyle, family time, holidays and quality of life you can achieve with literally just one or two properties. I’ll be talking more abut the different types/markets of HMO’s in my next article.

If you'd like to receive my latest FREE training videos (hints, tips, how to guides, HMO FAQ’s etc) as soon as they're ready, visit my website now and register your details: www.TheHMOGuy.com

 

Paul has written other articles about HMOs, check them out here -

The Four HMO Market Sectors

HMO planning and Article 4

The Lifestyle that's Possible with HMO's

 

About Paul Preston, The HMO Guy.

As well as being a successful property investor and businessman, Paul is a normal, down to earth, regular guy who's simply learned about property, taken action and worked hard to become financially free. Paul has been investing in property for nearly 15 years, is a self-made millionaire twice over (which means he made it, lost it all, and made it back again), he’s an international speaker, author and serial entrepreneur, having had several successful businesses outside of property.


Paul is an expert on the subject creating exceptional wealth through property and his specialises in HMO’s and Multi-let properties for high cash flow, generating returns well in excess of £1,000 clear profit, per property, per month.

 

 

 
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