HMO’s now being valued at 8% yield.

So what is an HMO worth? Just like with anything, what someone will pay for it.  You can, however, quite easily calculate what some specialised commercial valuers may value your property for without having to pay £250 – £1800 plus VAT for their fees.  If you can calculate what your HMO will be valued at or the HMO you are thinking of buying will value for, you will know whether you could remortgage for a further advance or maybe do a no money down deal but I am not saying you will be able to sell or even if the HMO is worth buying.  This exercise is mainly to assess what a lender will lend on the property whether you are buying or remortgaging. With established HMO’s that is a property that could be sold to investors as a HMO i.e. a property converted into bedsits (studios or flatlets if you are moving up market) and let as such or a house that has been consistently let to say students for many years in an area of good demand.  In such circumstances the property can be valued on income, commonly know as the yield.  Yield is the method by which commercial property has traditionally been valued and it shows how the housing market is developing that now HMO’s are beginning to be valued the same way.  Over recent years the yield on HMO’s has improved from about 12% in 2000 to 5.5% early 2007 but with interest rates going up during the year and the rest of the commercial market

weakening it is now about 8% except for purpose built student housing which still is valued at 5.5 to 6% yield.  The decision as to what yield to apply also depends on the quality of the HMO.
Usually newly refurbished studios and bedsits get valued more highly than a shared house with rooms only.

Let me explain the concept further, if a property is valued at 10% yield and produces an income of £10,000 per annum then it will be valued at £100k assuming there is no deduction for expenses.  At 8% yield the same income would produce a value of £125,000, 7% yield would be valued at £142,857, 6% £166,700 and 5% £200,000.  Looking at it from another way, how much capital would you need in the bank to give a certain level of income at a particular interest rate.  For example, if you required an income of £10k and interest rates are at 5% you need to deposit £200k (£200k x 5% = £10k) into the bank’s savings account, at 6% £166,670, 7% £142,857 and at 8% £125,000.  Now, hopefully you have the concept of valuing on income lets move on to the detail.  See later more on how to calculate the yield

Early this year when I had one of my properties valued the valuer was considering whether to use a 7% or 8% yield.  Purpose built student property is now being valued at 5.50% – 6% yield.  In the end the valuer decided on 8%, the rational being that my tenants were not as permanent as students, and so required higher management!  Having let to students I am not so sure, maybe students have changed a lot since I let to them, but I doubt it.  It comes down to what the valuer assesses HMO properties are currently fetching when they are being sold and student housing is the big thing now with lots of demand from investors for purpose built units.

When there is a lively market i.e. plenty of buying valuers can get information about what is being paid for property in that sector, known as comparables and can be more certain as to the going rate for that kind of property.  There is little uniformity in the property market.  Yields range from 3.5% for prime London office space to over 12% for secondary i.e. out of town, shops and offices.  Remember over three times the yield then less than a third of the value!

The problem is that no market is perfect and valuing property which is much less flexible than say shares is not an exact science.  Lenders want certainty and that is the role of a valuer.  A variation of up to 20% is generally accepted as being reasonable in the property market.  That is a big difference and we could all get rich on that.  Just ask three estate agents to value your own residence and see what figures they come up with.

Valuing an HMO on income is usually only used if it produces a higher value than the bricks and mortar value.  No one is normally going to want a lower value for their property.  Many valuers are uncomfortable about valuing residential property on income and try and reconcile the two values by reducing the income value to being closer to the bricks and mortar value.  It is, therefore, essential to choose a valuer who is comfortable with valuing HMO’s.  A valuer will also want to feel comfortable with you that you are professional, competent and above all going to remain solvent for at least another three or four years.  The last thing the valuer needs is for your properties to be repossessed and they have to justify their valuation.  After 3 or 4 years in a rising market there is less likelihood of any come back on the valuer.

Expenses

The yield is not everything, the valuer’s view on expenses can have a major influence as well.  Expenses are things like repairs, utilities, insurance etc but not the mortgage interest.  Valuers tend to be confused on the treatment of bad debts and voids, the more cautious will include them and so increase the deduction.  Some will also deduct a further 3% for selling or purchase costs.  Many valuers will, when valuing a HMO, take a standard 25% reduction for expenses, others are more cautions and I have had over 40% deducted from the income to cover expenses.

Loan to Value

Lenders in the commercial field normally only lend up to 70% of the yield valuation though I have known lenders to go as far as 80% LTV.  The other complication is that some lenders put a second cap on the amount they will lend by limiting the loans to the vacant possession value.  The vacant possession value is similar to the bricks and mortar value.

Interest Rate

Gone are the exotic variations (confusing!) of rates available in the ‘buy to let’ market.  Commercial loans cost more, usually about 1.5% over base or libor, though if you consider that normally standard variable rates are usually 1.6% over base or libor, may not be so bad.  The other major limitation is that most of the lenders insist on a short repayment period for example 10 years, very few will give a twenty year interest only loan.  A ten year repayment mortgage causes enormous cash flow problems compared to an interest only mortgage, it costs about twice as much a month.  I do not know how other borrowers cope, I usually end up remortgaging to reborrow the capital I have repaid.  I have also discovered that some lenders are open to a ‘capital holiday’ i.e. will give one to four years interest only but you need to ask.

The Valuer

Just as valuer’s vary on how they treat expenses so they vary on their assessment of yields or whether to even value on yields.  The choice of valuer is fundamental to this whole process.  If you choose one which is over cautions, they may often refer to themselves as, ‘Very professional’, if they do, do not touch them, they will wreck any prospect of obtaining finance by their qualified reports.  Lenders are very easily put off lending even by one negative remark.  You need a valuer who is prepared to take a commercial view.  My book ‘How to Become a Multimillionaire HMO Landlord’ talks in more detail about how to choose a valuer.

How to calculate yield

Take the yield and divide it into 100 to produce the yield multiplier e.g. 7% yield = 14.29, 8% yield = 12.5.  Take the gross rental income per annum and deduct expenses, usually 25% is the norm to give the net income.  Multiply the net income by the yield multiplier and that gives you the market value of the HMO.

Example 1
A HMO producing £32,200 per annum.  If valued at 7% yield and deducting 25% for expenses (the same 25% deduction is achieved by multiplying the gross rent by 75% and for a 40% deduction multiplying by 60%).
£32,200 x 75% x 14.29 = £345k market value.
With a 40% deduction for expenses
£32,200 x 60% x 14.29 = £276k market value.

Example 2
Same HMO as example 1, valued at 8% yield deducting 25% for expenses
£32,200 x 75% x 12.5 = £301k market value
With a 40% deduction for expenses
£32,200 x 60% x 12.5 = £241k market value

HMO Daddy’s Quick Method

Assuming a 25% deduction for expenses, a short cut for an 8% yield is to multiply the gross rent by 9.375 for 40% deduction for expenses multiply by 7.5 and for 7% yield with 25% deduction for expenses multiply by 10.72 or 8.57 for 40% deduction for expenses.
You get the same result.

To find out more about running your own HMO, get your FREE copy of “Beginners Guide To HMO’s And Multi-lets” now at www.hmodaddy.com

Investment Strategy

It is said that investment strategy is a personal choice. The type of property, whether to go for income or capital growth, the degree of management you wish to involve yourself in etc. For most of us and I include myself when I started, we do not or did not have luxury of such choice.  We do not have the capital or disposable income but we want to invest in property as we know it will
double in value on average about every 10 years.  Pensions are going no where and  job security for most is becoming increasingly uncertain. How can you buy a million pounds of property now, survive for ten years so hopefully wake up one day a millionaire?  The ten years will pass but will you be on the property accelerator?

The questions for the investor with little capital to answer are: firstly, how can you obtain the finance for the property and secondly, ensure that the mortgage and other expenses are paid for the next ten years. For most people they would be happy just to own a million pound property portfolio providing it does not cost them anything or involve too much time, but even better if it also brought in a surplus.   Just a little tip here which will save you a lot of hassle,  never buy leasehold unless you buy the freehold as well.

Cash out and rental profit strategy (CORPS) 

What used to work very well only a couple of years ago is what I call the ‘Cash out and rental profit strategy’.   It is nigh on impossible to use this strategy in todays economy and who knows if those days will ever return, but I will mention it anyway

A purchase must cash out within the immediate future i.e. 6-12 monthsand will still make a profit on the rental income (also known as a passive income)even after paying the increased interest on the extra loan from cashing out. ‘Cashing out’ means you get all your initial capital back i.e. the 15/30% deposit,renovation, legal and other costs and still have money left over. Anything that will do that I will buy, but at present, usually only HMO’s work for me and the occasional BMV(below market value)  properties

Making a profit on the rental income is very difficult to achieve in the short term, long term with rental increases, this is often feasible but rarely to start with. Investors, I feel, often delude themselves on the cost of running a property by assuming everything left after paying the mortgage interest is profit. In reality when voids, bad debts and renovation costs are accounted for they are
running at a substantial loss. The situation is made worse by having a repayment mortgage which costs 42% more than an interest mortgage. The profit is only in the capital appreciation which is substantial when the property is highly geared.

The advantages of HMO’s

An HMO can have a number of meanings, I am referring to where you divide the property up and charge by the room instead of charging for a wholeproperty. The property does not have to be anything special, I have successfully  used two bedroom terraced houses as HMO’s. You also have the advantage that you can use properties which would not let as a house and are often cheaper
to buy than a house of the same size as an HMO, for example an old pub or offices. The rent received by doing this can be as much as three times the rentachieved letting the property as a whole to one tenant. However, there is usually a lot more administration and regulations involved when letting a property.

Cash flow is king

Cash flow is the main thing you need to bare in mind in any property purchase. If  the property is paying its way you can afford to keep it for as long as it takes.  Property is kind over the long term and will substantially increase in value but you have to ensure you can afford to hold on to it. Again this is why I like HMO’s, the income is substantial compared to single lets even after discounting the extra costs, administration and bureaucracy.

I shy away from projects where I have to rely on selling the property or where I do not make a profit on the rental income because I  consider these too risky. What if I cannot sell? I would then be stuck with a property and still have to pay the mortgage and may also have money tied up in the deal which will stop me going forward and buying more property. From bitter experience trying to sell an investment property at anywhere near its market value is very difficult. There are just too many investors out there looking for a bargain! The sale process usually takes a long time, three months or more and a high proportion of sales do not complete.

I have found buyers withdraw for numerous reasons, for example: ‘I have changed my mind’, ‘I cannot find a lender and surprisingly, they do not have the money or the valuer or solicitor finds something that upsets the buyer. A recent instance which happened to me, where a buyer withdrew from a sale is where the environmental report showed an ex rubbish tip about a mile away, this put thebuyer off. During the selling period it is difficult to let property, tenants dislike the uncertainty and move out and as the owner you are de-motivated to do anything with it the property.

The buying price

This is how I decide if a property is worth buying. I add to the purchase price the cost of improvement works i.e. what is necessary to bring it up to HMO standards, and see if it will value up sufficiently to get all my input money back and still generate sufficient income to pay all the costs and make a profit If it does then I buy .

Gone are the days when I would buy a property, not quite, I still occasionally buy the odd gem on a wim, and just hope the property prices will increase and allowme to apply for a further advance or  re-mortgage to release my input capital. Now the deal has to usually stack up when I buy.

To find out more about running your own HMO, get your FREEcopy of “Beginners Guide To HMO’s And Multi-lets” now at www.hmodaddy.com

You are looking for someone whose mortgage is higher than their house value, but without loads of debts or bankruptcy.  I believe that repossessions are financially unsound, some property investors never bother with them at all,  the time frame is too tight for some people.

When speaking to a prospective vendor, be prepared to be a counsellor, to listen, understand and to help them with their problems.  You have to be able to calculate what the property will cost to divide up into lettable units.  Is it viable?  Can I let one or two rooms to fund the work on the rest of the rooms?  Two rooms should bring in £120 a week income for the pair.

There are a couple of ways that you can find properties that are suitable for using the lease option strategy;

1. Look out for neglected properties – find out who owns them, what’s their story?
2. Find properties that have been up for sale for a long time, find out how long the property has been on the market for and work out how much mortgage the owner would have had to have paid during that time.

Doing the groundwork

A good place to source properties is to check on Rightmove.  Go and see the properties, and always talk to the neighbours.  Do not talk to lettings and estate agents, they really aren’t worth your time.

Ask the owners if they have a mortgage, and how much is outstanding, what are their monthly repayments.  Can you afford to pay their mortgage for them?

As an example: assume there is a property that has been for sale for 18 months, with a £600pm mortgage.  Always ask the vendor for the first 1 year free of mortgage payments.  You could compromise on paying 50% of the mortgage for that first year if they bargain with you.  By converting the property into multi-lets, it could give you £25,000 p.a. income.

Taking on a property is one skill.  Multi-letting is quite another skill.  You need other skills too.  You must always be able to do the maths on a property.  You have to know that what you are paying is no more than £x to make it work.

Rental income is generally 1/3 of the gross rent.  I pay the owner 2/3 of the market rent in Walsall.  The more expensive the property (£100,000 & upwards) the better this formula works.  I have one property worth £750,000 with a £500,000 mortgage.  The mortgage costs £2,000 a month.  I am getting a 25% return on my investment.

When calculating the costs, remember that any HMO, of whatever size, will cost £60 per week per property to run – this covers the water rates, council tax, electricity, TV licence etc.  A property should break even at 5 rooms, anything above that is your profit.

Do the figures – as a rough guide, this is what you can expect:

• Council tax – £1,000 p.a. (Walsall figures – higher council tax areas cost more)
• Central heating – £800 p.a.
• Electricity – mine are metered in rooms, so zero to me
• Water rates - £3-400 p.a. (n.b. metered supplies are a nightmare)
• Insurance – £140 p.a.

Start letting som rooms immediately for income to fund the repairs / conversion etc.  Don’t buy anything that needs major renovation or has structural problems.

Always ask yourself;  Will it work for me?  If I were a tenant, what would I take?

The important question to answer before you get involved, is ‘Does it make a profit?  Is there headroom enough to make a profit?’

If I give the vendor 2/3 of the market rent he might have had by marketing the property himself, he will have no voids, no bad debts, no repairs, no maintenance, no insurance, so it’s a good deal for them.

Making the offer:

When you contact the owner, ask them “Would you like long-term guaranteed rent?  I’ll maintain, repair the property.  There will be no voids.  Would that appeal to you?”

If the property is for sale find out how long the property been for sale?  If it’s 18 months, then it’s cost them 18 months rental income and mortgage costs.  Suggest to the owner that “If I’d been paying the rent for the last 18 months, you wouldn’t have lost £9,000” (or whatever the calculation) and see their reaction.  This tactic doesn’t work all the time, I started with a 1 in 20 win, which I’ve improved to a 1 in 3 success rate with experience.

Tell the owner that you are offering to rent the property for up to 120 months (to them that will usually sound like 3 – 4 years), with a right to purchase after that time and to sublet.  Don’t say it’s 10 years, that tends to put people off.

Hook them with a long-term rent, include the right to buy, the owner fixes the price – or at least says I’d like £x.  You’ve told them “I would love to buy the property but in today’s property market although I’d like to buy at that price, I
just can’t.  Then tell them that you’d like to rent long-term.  Keep everything simple, do not confuse the owners by using the term ‘lease options’.

Explain that in 5 years (or when the lease option expires) the owner will have had the entire mortgage payments paid for them (in the form of rent from you), and that either they will be then paid by you to buy the house, or they get the property back, whichever option you both agree on.

When speaking to a prospective vendor, be prepared to be a counsellor, to listen, understand and to help them with their problems.  You have to be able to calculate what the property will cost to divide up into lettable units.  Is it viable?  Can I let one or two rooms to fund the work on the rest of the rooms?  Two rooms should bring in £120 a week income for the pair.

Your target is to multi-let, to split up rooms to make the house a multi-let. This may put people off but remind them that any property would need refurbishing anyway within 10 years, so any damage or ‘improvements’ made by your tenants are actually irrelevant to the owner.

To find out more about running your own HMO, get your FREE copy of “Beginners Guide To HMO’s And Multi-lets” now at www.hmodaddy.com

HMO stands for House in Multiple Occupation, so, HMOs are shared properties which contain more than one household. The law generally defines an HMO property as a building which is shared by `more than three people and more than one household.` Self-contained flats and bedsits and shared houses are therefore included in this category.

Student houses and flats where students share communal space and rent rooms are also considered HMOs. There are some differences between HMOs and standard single occupancy renting. One is the amount which you could stand to earn. Some landlords have been known to make as much as a third more rent by choosing to let their property as a HMO instead of a single occupancy let. Hotels or bed and breakfasts, bedsits, hostels, shared flats and houses, and halls of residence are all considered HMO’s.

Rights and Responsibilities

When it comes to HMO rights, you`ll have all the rights associated with being a private landlord. However, before renting your property out, you`ll need to obtain a license to do so.

You will also need to contact your local authority in order to consult Health and Fire Safety Officers. You are under all the usual obligations as an HMO landlord as you would be a single occupancy landlord. Although, on top of these responsibilities such as keeping the property in good condition and ensuring it is safe for tenants, you`ll also need to:

. Obtain a license to operate your HMO
. Have fire extinguishers and smoke alarms fitted and tested regularly
. Pay the tenants council tax (this amount should be included in their rent)
. Display contact details for the property manager (either you or an associate) on the premises
. Take out a special type of HMO insurance
. Take partial responsibility for any nuisance or disturbance claims from neighbours
. Keep stairways, fire escapes and passage ways unobstructed
. Register with the local authority and provide information regarding your tenants
. Not overcrowd your property
. Keep the property habitable and carry out any maintenance work which needs doing
. Keep contracts/documentation for all tenants

Ensure that the layout and facilities are an acceptable standard as dictated by your local authority

To find out more about running your own HMO, get your FREE copy of “Beginners Guide To HMO’s And Multi-lets” now at http://www.hmodaddy.com

The 5 points are:

1. They are in full time employment and have been for 6 months.  You can quickly and easily check this after casino online pl September by asking them for their latest payslip and check the total taxable pay to date.  This is only the case after September as taxable pay is calculated from April, but at least you can see if they have been with the same employer since April.

2. Their net pay is two and half times their rent, eg. If your rent is £80 per week then they need to take home £240 per week.

3. They can pay the rent up front and if you charge it, the deposit and / or administration fee.  If they can’t pay now they rarely can pay later.

4. Fill in your application form completely and satisfactorily.  Get a copy of mine, you need to ask about convictions, dependencies and if they have been evicted.  If they have been evicted or are alcoholics or druggies, don’t take!

5. They feel right – use your intuition.

To find out more about running your own HMO, get your FREE copy of “Beginners Guide To HMO’s And Multi-lets” now at www.hmodaddy.com

Licenses might not work with single lets in houses and flats as the occupiers can argue they have exclusive possession, while in an HMO they can agree to use any of the rooms in the HMO and therefore would not have exclusive possession of any one room.

Should the legality of a license be challenged then it can only default to an AST so I am possibly no worse off than having granted an AST in the first place. With a license I just ask the occupier to leave, no notice is required though the agreement specifies 7 days notice where there is no default by the licensee and I have not had many problems with occupiers leaving when asked to go but usually I give them time to find somewhere else to live.

I believe that it is very unlikely that any Local Authority Housing Department or Housing Action Group’s would challenge my use of Licenses providing they are not used oppressively as they use Licenses for their own hostels etc. The use of Licenses is widespread throughout the Social Housing Sector and used by them in Hostels, Foyers YMCA’s YWCA’s etc. My solicitor and I referred to these various Licence Agreements when drafting my current Licence Agreement. 

The traditional view of AST’s is that the tenant agrees to occupy the premises for a period of time and gives notice of leaving. This may work for some kinds of tenants but not for most of my HMO occupiers, who tend to be what is known in legal terms as ‘persons of straw’. In other words if they do not comply with their contractual obligations there is nothing I can do. From experience most of my tenants show little regard for their contractual obligations. Unfortunately, the reverse is not the case, they are often, only too aware of their ‘rights’ and would not hesitate to claim for harassment, illegal and unlawful eviction with little effort or cost to them as action will be taken  by the local council or funded by legal aid or by numerous ‘no win no fee’ lawyers. Successful defence of such action would incur substantial legal costs, which I am unable to recover from the occupier. The use of licenses also speeds up the matter of tenants who abandon the property. There is no need to serve notices of abandonment (which in itself is questionable) to the tenant and, usually, I have no redress for the unpaid rent and costs. Using licenses avoids the costs and the time to evict, thus making substantial savings in bad debts and costs. There is antidotal evidence that prompt action against rent defaulters has spurred other possible reactants to pay their rent promptly. Previously, I have had tenants refusing to pay and demanding money to leave and as word soon spreads to the other tenants I have ended up with a house full of defaulters.

It is also questionable even when using an AST agreement, whether many of my occupiers would actually be AST’s as they have a permanent home elsewhere and are only staying at my properties while working in the area, and therefore, are in fact licensees. For an occupier to be an AST they have to show that it is their permanent home.

From any mortgagees view they are not disadvantaged by use of licenses, as HMO occupiers will come and go as they please whether AST’s or licensees are used i.e. it does not make any difference to their length of stay/ permanence, and it has not proved to be a barrier in letting the properties. No prospective occupier has ever questioned never mind objected to their use.

To find out more about running your own HMO, get your FREE copy of “Beginners Guide To HMO’s And Multi-lets” now at www.hmodaddy.com

Whether a new or an experienced landlord, all you need is the knowledge of how to do Rent-to-Rent, Lease Options and Delayed Completions and you could obtain properties for nothing or very little, which with good management could cashflow for thousands of pounds profit a year providing the property is turned into a HMO. This year I am running a number of courses on how to do just that, please visit my website www.hmodaddy.com

It gets even better:

(i) With the government now stating that ‘up to 6 sharers’ is now permitted development, it has removed some of the opposition that planners have had against HMOs; but I do not think it has on online casinos eliminated all the problems that HMO landlords may have with planners. I cannot see the planners in some areas of the country giving up that easily – we will see!

(ii) Every observer concludes that the demand for HMOs is on the increase so there should be a need for more HMOs which, all in all, is good for HMO landlords.

(iii) The proposed change in 2012 of the age from 25 to 35 years old for the shared room rate for tenants on Housing Benefit is fantastic news for HMO landlords as it will increase demand for rooms from a bigger age group.

What is going to be the impact of the changes to Housing Benefit (HB), now also known as Local Housing Allowance (LHA) is hard to assess. Landlords continue to say that they are pulling out of the HB market – however, they said that when LHA and direct payment were implemented yet the HB departments in my area report an increase in the number of landlords who were housing tenants.

Will the current changes be the straw that breaks the camel’s back? I doubt it. I think along with the reduction in funding for the social sector it will only increase the demand for landlords to house HB tenants but it may reduce their income. No doubt landlords who continue to house HB tenants will be looking to increase the capacity of their properties so as to retain their current level of income. I expect them to be: splitting rooms to make two smaller rooms (thereby doubling the amount of HB payable for the same space) converting lofts, garages and cellars into rooms or building extensions to try and achieve the same income or more, or as the planners say, increase housing density. There will also, I expect, be a significant move from single letting to multi-letting.

As often happens in these situations, it will give landlords the incentive to review the profitability of their portfolio and increase their income by responding to a changing market, however,  about Universal Credit.

To find out more about running your own HMO, get your FREE copy of “Beginners Guide To HMO’s And Multi-lets” now at www.hmodaddy.com

I believe that HMO’s outperform the property market and so I have come up with the following unproven statistics acquired from observation of the HMO market.  Take a building, for example, a large house, and turn it into a HMO with a minimum of five units, the HMO being developed over the years to maximise its full potential as a HMO then the following HMO Daddy rules casino portugal apply:

1. Rule of twenty is that after twenty years the original purchase price of the property which is then converted into a HMO will equal or thereabouts the gross rent.  For example, a house purchased in 1991 for £30K will produce a rent of about £30K per annum today as a HMO.

2. Rule of forty ten is that after forty years a house purchased and turned into a HMO then the gross rent per annum will be about ten times the purchase price.  For example, a house purchased in 1971 for £4K will produce a rent today of about £40,000 per annum as a HMO.

3. Rule of three is that a HMO grosses about three times the income of the same property let as a single unit.

Note: You need to spend a considerable amount of money over the years improving and keeping your property up to standard to achieve these returns.

Be clear about why you are investing in property and remember why when things get tough as they will. Most people want financial independence. How much money will give you financial independence? It is generally accepted that a million pounds would not be too far off the mark. So how do you get a million quid? Borrow the money to buy a million pounds of property today and apply the rules above and wait for the property value to increase and in the meantime get a good income from rental.. HMO’s give a substantially greater income compared to single lets so you should easily be able to repay any mortgages or loans

To find out more about running your own HMO, get your FREE copy of “Beginners Guide To HMO’s And Multi-lets” now at www.hmodaddy.com

I tell it as it is, letting and managing property is so easy I find it boring, once you get over the learning curve. There is so much information out there on how to do it yourself, compared to when I started, and if you want to talk to someone about it, join one of the Landlord Associations. They not only recommend books but have web sites on how to do it and all provide advice lines where you can talk to someone with experience. I belong to all of the Landlord Associations and occasionally call them for advice. You can never know everything and sometimes it helps to talk it over. Details of the Landlord Associations are at the end of the article and they all cost about £70 each to join for the year, £300 to join the lot, fantastic value for money! I find it difficult to choose between them, they are as good and bad as each other but they are all we have got.

A landlord is no more than a hotel chamber maid mainly dealing with fairly menial tasks. Don’t get me wrong, I enjoy going out and meeting new people, dealing with tenants and their enquiries and get pleasure out of helping them by solving their problems, but like I suspect with all jobs it gets repetitive and can wear you down. The injustice and unfairness of being a landlord is the subject of an endless tome. Most people would not voluntarily choose to be a landlord, but for the money which usually only comes from property appreciation, which brings me back to the point of all this. If you do it yourself you will save a substantial amount of money and where yields are tight reduce your loss or make the difference between a loss and a profit or even better, if you are making profit make even more profit.

I also suspect that by managing your properties yourself, in most cases, once you get over your lack of confidence, much, much better than most agents. After all, it is your money and normally no one looks after anything better than you do. Now that you make more money this will also compensate you for the trouble of teaching yourself to be a landlord. I am a qualified lecturer and trained ‘Landlord Accreditation’ trainer and I run regular courses on how to become a landlord and provide on the job training for those who want to have practical experience.

But what about the midnight calls you ask? What about them? Very few letting agents can be contacted outside office hours and many even during office hours! You could say that tenants have to learn to look after themselves or you arrange cover from one of the reasonably priced insurance schemes which charge about £100pa to provide for tenanted properties a 24 hour emergency service for leaks, electrical faults, central heating breakdowns, broken locks & windows etc. See my book ‘How to Become a Multimillionaire HMO Landlord’ for more details on insurance. As for the other enquiries, an answering machine will do, you can call them back at your own convenience.

As for all the rest, being a landlord is essentially a people business and you should look after your tenants. How much attention and crap you put up with is down to you but many letting agents I know of just deal with the persistent complainers, they ignore 99% of the rest and most of the problems are solved by themselves or go away, but this is true in a lot of businesses which deal with people.

There is not much to being a landlord once you accept you are a door mat in an unfair system, the rest can be learnt on a need to know basis. I would always ensure I do and know about the casino spiele following, but I know many landlords who do not even bother with the first three and can be surprisingly lax about the last point:

1. The property is up to a reasonable standard and has a gas certificate and where required is licensed.

2. Have a written tenancy agreement, obtainable free of charge from any of the Landlord Associations mentioned earlier or use my agreement, see my web site HMODaddy.com for details.

3. Do not take deposits, charge what you like instead, but call it a administration fee, see my article ‘Twelve ways to avoid the Tenancy Deposit Scheme and Turn it into a Financial and Marketing Advantage’ it is on my website HMODADDY.COM the article does what it says in the title.

4. Act promptly on rent arrears and do not believe any of the excuses about late payment.

Whatever the agent charges I believe it is too much and is better in my pocket. It is not only the 5%-20% management fee but the set up fee and extras they add on for dealing with problems from your tenants, if they ever get round to dealing with them. You may consider using a let only service where for about a months rent they will find and maybe vet a tenant for you. Check if and how they will vet the tenant before using the service.

It is worth looking at what some agents charge and for what and learn from them.  Most landlords do not charge their tenants anything for setting up the tenancy agreement, renewing the agreement, references, call outs, cleaning, inspections, vetting the tenant etc.  I was pleasantly surprised just how little resistance I had when I started to charge an administration fee for setting up a tenancy.

My main two concerns about agents is that they often do very little for what they charge and secondly, so many go out of business owing the landlord money. If you do use an agent then it is worth using one who belongs to a professional association, which provides a compensation fund.

I have heard so many terrible accounts of landlords being fleeced by their agents, it is bad enough being robbed by the tenants. With the Tenancy Deposit Scheme being widely ignored I suspect many more problems will emerge with non-compliance.

I was drawn into using a letting agency as a way of building a business relationship, I gave the agent four of my properties to manage to encourage him to pass on to me the below market value properties he came across. He ran off with the best part of £10k in rent and deposits from the tenants. I should have known better! But as I say, the only person who does not make a mistake is a person who does nothing and they make the worst mistake of all, by doing nothing with their life!

I estimate, if all your properties are close by i.e. within 5 minutes or so of your base, I believe you can look after about 100 single let properties or 10 HMO’s all by yourself and it will take around 3-10 hours work a week, hardly noticeable if blended into your weekly activities.

I hear the argument that a property investor should be spending their time ‘Working on their business’ not ‘Working in the business’. Instead of dealing with tenants, chasing up rents, cleaning and changing light bulbs you should be out finding more good deals and sorting out finance. I agree with this to the extent that this should be the priority but I do not believe that most people do not also have a few hours spare to manage their properties as well. I used to treat my rent collecting and doing viewing days as an opportunity to meet people and widen my social life, but then, maybe, I am a particularly sad person.

Do not assume a letting agent is the end to your problems of managing properties, often they only increase your problems by their poor management and rapacious attitude. Some agents do very little apart from find the tenant and collect the rent by standing order. Any fool can deal with that. As soon as problems occur they pass them directly on to you instead of sorting them out themselves and or want to charge extra for dealing with the problem, for example, non- paying tenants, repairs etc. By the way if you are worried about having bad tenants you can insure against this as well for a modest amount, about £140pa. It is all in my book ‘How to Become a Multimillionaire HMO Landlord’.

I have no experience of managing properties at a distance but from contact with other landlords the magic number is 30 properties UK wide. These landlords say that they can manage up to 30 properties by themselves and begin to struggle above 30 single properties. They are all full time property investors and they do not count their time. Some are starting to rationalise by selling off properties outside their main areas so they can buy more but within a limited geographical area so they can more easily manage them.

To sum up, I do not wish to be unkind to the good agents out there who do an excellent job and having tried managing other peoples property, they are like builders, another one of my bones of contension see the section in my book about good builders, more sinned against than sin. Looking after property is no big deal, just do it.

To find out more about running your own HMO, get your FREE copy of “Beginners Guide To HMO’s And Multi-lets” now at www.hmodaddy.com