What is an HMO And Why You NEED To Know About Them Today!
Written by Paul Preston - Property Expert
Never heard of an hmo? don't worry, property Expert paul preston explains exactly what they are and also why you need to be using them immediately in your property journey.
Firstly, you need to know this... HMO’s create LIFE CHANGING income. I’m not talking about £50-£100 per month here and there, I’m talking about substantial income, perhaps £1,000 - £2,000 per month CLEAR PROFIT, on every property! But I will come to that later, first you need to know what they are.
Before I get into the good stuff, if you just read that statement and you're sat thinking 'This is too good to be true' that's ok! And you know what? You're in the same boat I was when I first heard this, but stay with me, because this is truly life changing and you will see why later!
In this, the first of my series of articles about HMO’s, Multi-Lets and most importantly, how to use these fantastic properties to create life-changing income, I thought it was best to start with the basics, so ‘exactly’ what is an HMO?
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.
So, now we know ‘what’ and 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, which is why you should – in my humble opinion - be using HMO’s as a key part of your property strategy.
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 £24,000 a year, so if you have one HMO that cashflows £2,000 per month (for example), this is equates to the average salary in the UK, on just one property! On top of that, using my Cash Flow Maximisation Secrets, to literally make extra money out of thin air (which I’ll cover in a future article), you can easily add a further £2,000-£3,000pa on top of this, pushing the income towards £27,000pa, which is MORE 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! – largely 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, but if you really want to get results fast, if you want to learn how to take simple houses and transform them into lifetime cash machines, and you want to know how to get these houses for ‘free’ (ie using none of your won money, with no need for you to get a mortgage or put a deposit down today), then keep an eye out for my additional free training resources, videos and blogs.
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About Paul Preston
Paul has a £multi Million property business with over 100 units. He has been able to move to his True Passion, teaching others to achieve the life they want and deserve!
Paul has spent time creating the perfect environment for accelerated learning with a successful community of like-minded investors all there to help and support each other.
With Paul's honest and relatable approach to speaking and education he has been fortunate to share stages with some of the biggest names in the industry, most recently in April 2016 where he was able to share his story with thousands of people at the National Achievers Congress.
In September 2016 Paul's hard work over the last 5 years paid off being crowned 'UK Speaker of the Year' for the Second Year Running - something that has never been done before. He also made it a double for the night receiving the Prized 'Product Showcase Of The Year' for his impeccable work with his Elite Mentorship Programme.
As always, Paul doesn't take the credit for these accolades and sends all the praise to his dedicated Mentorship Partners who have trusted Paul's knowledge and guidance to push themselves to the next level.
