So just wanted to give everybody a couple of ideas on how you might be able to change your property investment strategy and make a bit more money. Maybe if you’ve got a property at the moment that you currently have rented out, then there’s a couple of things that you can do that increases the income. Now, it also increases the expenditure but the idea being that if you increase the income enough and you increase the expenditure as little as possible, then you can make a bit more profit, so if you are currently a buy-to-let property investor, a buy-to-let landlord, then you can do one of three things to improve your income, your profit, your wealth and so on.
So tip number one is, you can turn your property into a HMO.
Now, sounds really obvious. You’ve probably heard the term HMO before. If you haven’t, it’s a house of multiple occupancy, which means put simply you renting it out room by room as a room layer or a house share, something like that. Now, there are loads and loads of rules and regulations and legislation around HMO properties, room sizes, communal area sizes, number of people living in the property there’s tons there’s a whole different video. If you want some help, by the way, on HMO, or some advice on how to make sure that you don’t get a huge penalty. They’re really focusing on HMO, properties at the moment, the council’s, and the government. But if you want some help on that, just contact me firstname.lastname@example.org and I will connect you with my lettings team for some support, for some advice and guidance. Anyway, so HMO property room, let’s house shares whatever you want. Now, the first thing that does is increase the income that comes into the property, right? Because if you would normally rent a house out, and I’m just using a nice round figure here. If you would normally rent a three or four bedroom house outlet, say for a thousand pounds a month, you might now be able to rent out each room for four hundred pounds a month or maybe even four-fifty but four hundreds, a nice easy number, so I’ll use that.
But you could use let’s say three bedrooms
to rent out, that’s twelve-hundred pounds a month and you could probably turn one of the reception rooms into or the lounge into a another bedroom that you could rent out room by room and that’s another four-hundred pounds. You could turn your one thousand pound a month rental property into a sixteen hundred pounds a month rental property. The management fees are normally about the same, you will need to check with your mortgage lender that they’re okay with the HMO, same with your insurance providers. Just to make sure you’re covered if you need to, but that’s one quick way that you could turn a standard buy-to-let house into more income. Now, before you just go ahead and do that, couple of things that you need to know. HMO property is a much higher risk property. So yes, you’re getting an extra sixty percent on top of the normal rent, you would achieve as a buy-to-let, but with that comes some risks so first of all, there’s a risk in the void periods with hmos and room lets and house shares and things like that. There is a faster turnaround of tenants. Now, that basically means that you’re always going to have periods of time in the year where that one of those rooms or more is going to be empty. So the tip there is to try and work out your prices, to make sure that you can afford to have a couple of rooms empty for one or two months every year, and if you calculate it like that and it still works it might be a half decent move for you. Personally, I don’t really like HMO unless there’s a cracking deal in a cracking location, then I’ll go for it but as a general investment rule I like houses, I like standard buy-to-let properties that are just profitable. I try and aim for about twenty percent return on my cash.
But, you know, now I’ve got that secure portfolio of safe, reliable, profitable properties. I have ventured into HMO and I also have ventured into the second strategy, which I’ll give you in a second. Yeah, remember that that property is going to have empty rooms at various points throughout the year and that’s okay as long as you calculated it correctly. The other increased risk is repairs and maintenance. For some reason people that rent rooms don’t tend to look after them as much as people that rent houses and that’s okay again. Because as long as you take it into account within your calculations, then you will be fine. It also means that you’ll have to carry out more, refurbishments, more often, more carpets, more repainting, more repairs, plastering things like that, flooring. It just means that there’s more people going in and out of the property, more people using the property and again, like I said, just now people in room let’s this is not always, but in general, most of the time they don’t look after the property as much as standard families and standard houses.
So all in all look there’s loads of other risks and I’m not going to go through them all today, but loads of risks that increase as you increase that revenue from a HMO, but as long as you’ve weighed up your risks versus that income versus that profit, if you can afford to do it, and it makes you more money and you’re okay with that increased pressure, that increased hassle if you like? Because it is a hassle, then then go for it. Why not? And again, if you want some guidance on turning your property into a HMO, then I am more than happy to do it. I’m in HMO myself and also, as I said in strategy number two, which I’m just about to give you. So yeah, just reach out, give me an email email@example.com, if you want some support on that.
Strategy, number two for turning your your existing buy-to-let house or flat into a bigger income, more money, more profit is serviced accommodation. You might have heard of that already but serviced accommodation in other words is a holiday let an airbnb. Those types of properties that you know, we’re all looking at the moment, aren’t we? We’re all trying to book holidays for places and we’re looking at these airbnb properties and we’re thinking “Oh! a hundred and fifty pound for a night. That’s all right, I’ll get the whole place to myself. It’s a nice area.” So serviced accommodation or holiday lets is definitely a thing to consider and I’m going to give you some examples here in a few little stats that you need to try and work towards. So first, you need to work out the general occupancy for that area if you go to a website called AirDNA. If you go to a website called AirDNA it gives you an overview of holiday let’s in that area it’s really useful. It gives you some guidance on how popular the properties are, what sort of properties people go for in that area. It will give you an idea whether yours is going to be popular or not.
Now occupancy is a really important metric to keep your eye on. Occupancy is basically, if you’ve got a property and there are three hundred and sixty five days of the year, but your occupancy level is only fifty percent. That means your property is going to be occupied for only fifty percent of the year so that means you’re only going to get fifty percent of the income and if that still works for you, if that calculation works, go for it. Why not? And I’ll give you a couple of examples here. I’m going to try and keep this really simple. If there are say thirty days in the month and you are charging a hundred pounds per night then that is a potential of three thousand pounds in the month in income, which I hope you agree with. However, if you are only going to fill that property up across the year for fifty percent of the time, then that is fifteen hundred pounds per month. Now, of course, that is going to fluctuate throughout the year. There are going to be much more popular times and much less popular times so if you’re filling it up one hundred percent throughout most of the summer, or for half the year, but you’re filling it up at fifty percent for the other half of the year. Then your total occupancy is going to be seventy-five percent, which is pretty good, that’s not bad. That will also give you about a couple of grand let’s just say two thousand two hundred and fifty pound in income, nice.
So, there is a definite income increase to be had from turning your buy-to-let property into service accommodation or holiday lets and you would quite simply just advertise that property on Airbnb, or Booking.com, or you could have a website for it, use Facebook, all of those places. There’s loads of ways you can advertise that property really good ways too, so that’s that. Now, if you are going to increase the income, of course, you are going to increase the risk. That is the way this works, that’s the way investing works, investing is awesome but with increased reward comes increased risk, but as long as you know, what that risk is and you’ve calculated that risk and you can still make profit in a reliable, robust and secure way. Hey, go for it. Why not? Definitely go for it. So what are the risks?
Risk number one is that you will have an increased cost at the beginning. Your way to think about holiday lets is exactly how you would think about it if you were looking for a holiday let. You want a hotel, that’s what people want. Now they want hotel quality, hotel stand, and hotel style.
And when you’re looking for an Airbnb property, booking.com property, a holiday let. You’re looking at the furnishings, you’re looking at the decor you’re looking at the local surroundings, you’re looking at. Why would I go to that place?
What’s nearby? Who are you going to attract?
So the risk is that you’re going to have a higher cost at the beginning, because you’re going to need to furnish this place to be superb.
Now, yes you could probably do a basic job. However what I see in the holiday let market right now is the standards are going up and up and up and up and there are more and more properties now that are of high quality, hotel like quality and they’re the ones that are getting snapped up. So if you want to do a good holiday let from your property, then don’t go cheap on the finishing, the furnishings, the fixtures, the fittings, the quality.
Risk number two is that there is a much higher ongoing cost to that property. Now, most of the time that is on a bit of a pay as you go basis so you can calculate it. One of the biggest challenges with holiday lets is linen. Who is going to change your linen every single day? The bed sheets, the duvet covers, all of those things need changing every single day and that’s fine if you can figure that problem out. The next thing is how much of that linen do you have to buy? Who’s going to clean it? Now, you can do a deal with your local laundrette. That’s one way to do it and every day just dropped the laundrette just drop the linen into the laundrette every single day. They get the job done nice and quick and then you just pick it up and there you go. That’s another way to do it but you do that deal with the local laundrette.
If you haven’t got a local laundrette, you’ll need to find another solution but one way or another, you have to have clean linen every single day.
Well, for every single day that your property is booked as a holiday let so try to remember that and then you’ve got the cleaning. You also have to clean the property every single day that you have a booking. Now, there are some holiday lets that perhaps just if you’ve got to say a three-day booking, they’ll clean it at the beginning, they’ll let the tenants or the occupants look after their own cleaning and then they’ll clean it at exit. When that current booking exit, fine.
One way or another, you have to get that place cleaned and so you need to go clean up so you could do that yourself, you could do the linen yourself. Of course, you can. The point I’m trying to get to here is that is an increased cost and increased risk if you’re trying to run this like a business rather than taking on a second job. I know a lady by the way, that we stayed in her Airbnb and it was like a little Annex next to their house. Lovely place, beautiful place and she did it all herself and I was chatting to her and she said that “She’s getting a bit fed up with having to do this every day.” She loves meeting the people , that’s fine. That’s another thing you’ll have to do. You meet people everyday if you do it yourself.
But she’s getting a bit fed up with having to do all the bloody linen or the cleaning repairing everything, doing all those types of things. She’s getting a bit fed up with it so that is something you’ll need to take on if you’re going to do it yourself and try to think of it as do you want to take on a second job? If you don’t, there are definitely management companies around. Now I will help you find a management company in your area or I will manage it for you as a holiday let my company provide a full holiday let management service which effectively takes you out of it. All you need to do is provide us with the property and then my company will manage it entirely from top to bottom, from bookings, to cleaning, to linen, to repairs, to maintenance, to legislation, for all of those things. Then my company can do that for you. And by the way, yes that was a sales pitch ,of course it was. You know, why else would I say it? But if you want that service, then I am one option. My company is one option. There are plenty of other managing agents out there if you can find them, if you want some recommendations in your area give me a shout. I’ll just link you up with somebody in your area. So that’s strategy number two, which is holiday lets. And strategy number three is keep it as a buy-to-let. Now, wait, I know that sounds really obvious. “Oh, okay so strategy number three, Tom is leave it as it is, brilliant. Well done.” Let me just elaborate a little bit. If you’ve got a property right now that is currently rented out to tenants. There’s a few things that you can do. Number one. Obviously, you can increase rents. Now, I’m not saying just ramped up the rents for no reason, but if you haven’t increased that rent for a few years you may well be entitled to increase the rent. Rents are going up. Now, I’m sorry, Mr. and Mrs. Tennant if that sounds harsh, but if it was the other way around and you needed to pay bills, you needed that money to support your family, to support your income, and the rents in that area are higher than is currently being charged. Then it’s only fair that rents go up in line with market values.
So increasing the rents is of course, one way to go to increase your income. Now, it’s worth considering having an annual rent review with your property. Now, there’s tons of legislation around rent increases, rent reviewing and things like that. By the way, if you need some help with that just let me know.
I’m happy to give advice by the way. I’m happy if you want advice on, if you’re managing your own properties or you’re with other agents who you’re not very helpful. I’m happy to share advice, share knowledge as best I can, but yes, so increasing rent is one thing. Now, bear in mind the tenant does have to agree to that rent increase, of course rent reviews and so on but just put it in place if it is available for you to do. The next thing you could do is reduce your expenditure and you could do that in so many different ways. You’re probably paying out for mortgages, insurances, repairs, maintenance management, all of those things. And the first thing I would do is have a mortgage review. If you have a mortgage, get a mortgage review. Again, if you want me to link you up with my own mortgage advisor, who is an investor himself and only works on investment, buy to let, bridging finance, those types of mortgages. Which means he is an expert in that field rather than just “Oh”
So, if you want me to connect you up with my mortgage advisor, I certainly will. It can’t hurt to find out what options you will have in the future. Even if your mortgage is not due for renewal today.
It’s later in the year or it’s early next year, or whatever it may be, have a chat with a mortgage advisor now to get some guidance and advice on what options might be available to you in the future. There’s always something that you might have missed, you might not know, even if you understand the mortgage world, you understand the property world, investment world. A mortgage person who’s in the industry right now. Who might have a little bit more insight, a little bit more behind-the-scenes knowledge that will help you and even if you don’t use that mortgage advisor, you will have got the information, you will have been able to work out whether it’s worthwhile you doing something like that. Remortgaging, refinancing and so on in the future so that’s one way to reduce your expenditure. I would say exactly the same thing for your insurances if you are paying out for insurances, even if it’s a fiver a month, a tenner a month, why not?
If you can save yourself a tenner a month on your insurances it’s a hundred and twenty pound a year, twelve hundred pounds in a decade that pays for your boiler, why not?
And you don’t have to do anything for this. You just let your insurance broker or my insurance broker. Again, if you want me to connect you up with my insurance, broker email firstname.lastname@example.org and I will just link you up with the person that will arrange that for you and give you the quotes and the information.
Tenner a month if you can just keep saving a tenner a month, everywhere on everything you do.
Why not? Ey? Why not?
So that’s another way so look you get the idea when it comes to decreasing your expenditure, increasing your revenue, your income.
Those are a couple of ways. Now, there’s one last little point when it comes to your existing buy-to-let and also with all the other strategies that I’ve just mentioned with your existing buy-to-let.
It might be worth selling and reinvesting and I’m going to give you a bit more information on that because that sounds quite vague. You might look at your property now, you’ve had it for ten years and it’s increased in value by a hundred grand, making this figure up. It’s increased in value by a hundred thousand pound, right? The property doesn’t owe you anything because throughout that ten years it’s been paying you rent and you’ve been making profit, fantastic. You’ve had a nice little life off that but now you’ve got an increased value of a hundred grand.
If you said to me, Mr. and Mrs. Landlord “Tom, I’ve got a hundred grand. What can I do with it?” I would be telling you that you could buy, I don’t know, between five and eight properties over the next couple of years. Now, what you would effectively do is turn your existing buy to let property into much more and when you get more properties, obviously, you’ve got more income, but you also have spread risk. Because if you’ve got one property and one tenant vacates, you’ve got all of your income gone until the next tenant starts paying rent.
You’ve got five properties and one tenant moves out. Then you’ve got four fifths of your income still coming in. Come on tom it’s early in the morning, maths in the morning, who knows. Anyway, do you see what I mean? But, if one tenant moves out, then you definitely got the rest of your properties bringing income for you so you’ll always have income there. Also, if you have different styles of properties in different places and one little market drops a little bit. Then you can guarantee that the other markets won’t all follow. There’s always going to be different markets that increase, and there’s always going to be different markets that decrease so you’re spreading your risk and any financial expert out there will absolutely be cheering that someone in property is talking about spreading risk, minimizing risk, increasing income, decreasing expenditure, maximizing profits. But the key to all of that is that it has to be reliable.
You have to have calculated for the worst case scenario. What is the worst thing that could possibly happen? And can I afford it if that thing happens?
So that’s that and the last thing I wanted to talk to you about very briefly is the HMO part and there is the option that you may be able to turn it into a commercial asset. I know now we’re getting complex. If you’ve got a HMO property with a certain number of rooms and they all within the legislation, they all comply with the current legislation then you could apply for commercial finance. Why would you do that? Well commercial finance would start looking at that asset, the property as more of a business, which then means you can have the opportunity to borrow more. Why would you want to borrow more? You borrow more money on one asset then you can buy more properties, simple as that so in finishing here your strategies are with an existing buy to let property turning into a HMO, turning into a holiday let or maximize it as a buy to let investment you then have other options. As I’ve mentioned, you can start looking at commercial finance., you could start looking at your insurances, your mortgages, you can borrow more, you can invest more but the key to all of that is that it’s got to be secure, it’s got to be robust, it must be affordable in the worst case scenario. That’s how I calculate all investments in everything I do. I calculate my business investment in. What’s the worst case scenario, if all goes horrifically wrong.
Can I still afford it in my business? If I lost fifty of my customers can I still afford to manage the business and run the business? Yes, if in my properties, if half of my tenants move out at the same time, can I afford to run my properties? Yes, that’s the question you’ve got to ask yourself.
And if you do that, you will be a very, very successful investor I promise you without doubt. In everything you do so I hope that helps. Now, look just to recap very quickly on where I might be able to support you with this. Number one. Obviously, my core business is lettings and lettings management. It’s my favorite part of the business. I love working with landlords, because landlords just have a different mentality. They have an investor mentality, whether you think you’re an investor or not. You have chosen at some point along your life to keep a property and that’s what separates you from regular people into investors. Now, you could be a prolific investor, you could continually invest, a serial investor or you could stay as you are but I can support you with lettings and lettings management. I’ve got a couple of letting agents, a few letting agents around the South. I also managed portfolio landlords. It’s a really popular part of my business at the moment. Portfolio landlords who have properties around the country what you would love, right? Correct me if I’m wrong, but what would be really helpful is if you had one managing agent rather than multiple managing agents around the country and you’re single sole point of contact, as a managing agent manages, all of the contractors around the country, all of the other letting agents to get properties let out. That’s what my company does as well.
The other thing that I would definitely be able to help you with is HMO management and also, HMO execution, meaning. Sounds terrible, doesn’t it? But if you have a property that might be available for HMO. Number one, my team will inspect it and give you a report on what they think you can and cannot do. Number two, they will analyze it from a legislative perspective and make sure that it would be compliant. Number three, they will put the tenants in the property. The right tenant in the property. Number four, they would then manage that HMO for you House of multiple occupancy. They would then continually replace tenants as a tenant moves out just so that you’ve always got a full up property, always producing income and that’s the key, isn’t it? Really? Why else are we doing this?
And it’s the same with holiday lets, I will either connect you with a holiday let management firm. I know a really good holiday let managers around the country so I will connect you with them if you’re not in my region. If you are in my region, then I will link you up with my team who will be able to either advise you on how you can do it yourself and there may be some support areas that they can help with or manage the whole thing for you.
And lastly, I talked about mortgages and insurances if you need some advice on mortgages and insurances, just take it, just take the advice. You can do what you want with that advice, but just take the advice in the first place. We’re all as investors and landlords I hope you are continually trying to learn about the industry, learn about other success stories and improvements that you can make and self-development and changing your mindset, those sorts of things. This is another way, learn about what you can and cannot do in mortgages and insurances purely and simply by talking to a mortgage advisor and an insurance advisor. Again, I will connect you up with mine.
No problem, you don’t pay me for that. I just connect you up it’s all a network, isn’t it? If I help you, you help me. You might be a customer. You might not, I’ll help my mortgage guys, my insurance guys, all of those people.
Yeah, so look, hopefully that helps and hopefully now you’re thinking of a few different ways you can make profit, make more money and maximize your investment. Remember there are loads of other strategies. Of course, there are I’m going to do some more videos on my YouTube channel, which will have other strategies, some more complex ones as well, more profitable, but more complex. So until then, go get it everyone. Hope you have a great day and see you all later.