Investing is all about making a return on your money.
Typical yields in the property market tend to be 3%-5% in the current climate for a single let. This means that if you are paying interest on a loan of 5% plus, then you’ll be losing money if you’re heavily geared (i.e. your loan to the value of your property is more than 80%).
With HMOs, yields are 8%-12% for a similar property based on the number of rooms.
This means a good positive monthly cashflow can be enjoyed and you can truly run a business that brings in cash every month.
A good rule of thumb is to aim to buy a property at between £30,000-£50,000 per room.
This means that a 4 bedroom property with 2 reception rooms on the market for between £180,000-£300,000 could be purchased depending on the market strategy you are following. Likewise, a 3 bedroom property with 1 reception room on the market for £250,000 would not stack.
Your main expenses on a monthly basis would typically comprise of:
Other expenses depending on the type of HMO strategy you are pursuing could include:
Typical cashflow could be anything from £250-£1,000 per calendar month after all of your bills.
How many of these investments would you need before you could quit your job?