If you want to leave your job, improve your cashflow or just be comfortable knowing that every month you’ll be making a ton more money than ANY other property strategy out there, then follow my simple plan and start making money the smart way.
1) Determine how much money you need to cover all of your living expenses and any other luxuries you must have!
2) Divide this number by £500 as this is the gross cashflow amount you will make per month per house. Rather than worrying about how many £50 cashflow properties you can get – focus on the big numbers. Add another £500 to this figure for voids/maintenance and you have your target number of properties.
3) Search www.spareroom.com for people looking for rooms in your area (I’d suggest 30-40 people minimum) and the rent they are willing to pay. Post your own test advert with doubles at £400 pcm (trust me you will get this rent nationwide outside London). If you get more than 3 responses in a week, go to Step 4. Otherwise, try again in a few weeks or try another area.
4) Source 3-5 bed properties that will allow you to rent 4 to 6 rooms. Avoid 3-stories for your first HMO as there is more work involved. Get at least 35% discount if you wish to put NO money in as maximum LTV is 70% as of 04.11.10. Aim to have more doubles than singles or the figures won’t work.
5) Start advertising the property 2 weeks before you complete. Furnish with high-quality wooden furniture (try www.yourhmoexpert.com for great deals), top-quality appliances and faux-leather sofas and LCD TV’s for the lounge.
6) Start moving tenants in. Your aim is to have the first two cover your mortgage, the next two cover your bills and the remainder is gross cashflow. This means that even if you have 80% occupancy, you won’t lose money (unlike other property strategies where voids are a direct hit to your bottom line). Your aim is to maintain 90%+ occupancy in order to generate £500+ pcm.
7) Once your first HMO is full; move onto your second HMO. Timelines should be one HMO every 60-90 days or possibly less if you are already a full-time property investor.
If you are unsure of doing this alone, team up with a friend and do it together.
Alternatively, check out my latest HMO guide which is available for less than the cost of a fast food meal at www.hmosurvivalguide.com
Thanks to Matthew Moody for providing this article.