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.
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