By
Matthew Moody
|
Property Investing
In today’s market, getting the right property investment is even more important than ever – and getting the right HMO property investment has become more difficult of late with many changes happening in the market place.
Over the last six months, we’ve seen the removal of:
- daylight bridging
- 90%, 85% and 80% loan-to-value buy-to-let mortgages
- the biggest buy-to-let lender, Mortgage Express
- dozens of smaller lenders have left, been amalgamated or withdrawn
- lower rental stress
- flexible lending
- lower credit ratings
- higher interest rates from the lenders
But its not all doom and gloom. At the same time, we’ve also seen:
- more and more and more deals coming through everyday
- 20% below-market value is the new 35% below-market value
- more estate agents wanting to work with investors
- rental rates increasing
- the Bank of England base rate drop to 4.5% (and possible more on the way)
So, what can you do in this climate to make sure you have the best possible HMO investment?
- Ensure that you do your test-research first to determine demand. You do not want to buying in a so-so area because the next 12-24 months will be tough for a lot of people.
- Ensure that you buy in the right location in your chosen area. There is nothing more disheartening than finding out that people do not wish to live where you’ve bought your house. Most houses will rent BUT make sure yours will for the rent you need to make a decent living.
- Ensure that you get a DIP done as soon as possible for the best product out there – products seem to be changing daily and who knows what else will happen to the lenders before we emerge out the other side. Usually (but not guaranteed) getting a DIP will at least secure the rate and LTV for a period of time for you.
- Ensure that you stick to no more than £50,000 per bedroom and ideally £35,000 to £45,000 stacks a whole lot better in the current climate.
- Go for the largest HMO that you dare with the least number of stories and most number of bedrooms. Reason being that 2 storey properties do not currently have to be licenced in most councils and the more bedrooms you have, the more monthly cashflow you will make.
- Use every means possible to find that deal; don’t just rely on one source of leads. You can use estate agents, the internet, newspapers, lead sourcers, finders, property clubs, professionals, leafleting etc.
- Remember, this is one of the best times to buy right now so don’t be afraid to make a silly offer. With 75% LTV being the maximum you can get, you need to be offering 35-40% below-market value with expectations of getting the deal through at 25 to 35% below-market-value.
- Find out who other property investors who are still buying are using for their brokers and solicitors and if you can, use them. Their teams may be more expensive but you are more likely to get the deal through.
- Get your financing sorted out as soon as you can. Don’t leave any creative financing to the last minute as it may fall down. Make sure that you start talking to a service provider sooner rather than later and get your funds secure.
- Do not underestimate your expenses. Use my £100 per tenant MINIMUM for a professional let and take £10 off a month for the other market sectors. It pays to be more cautious with this than optimistic as any uplift in profit will be a welcome surprise rather than a nasty one!
Its a buyers market right now and those investors who are out there stacking deals every day will find some that do stack up.
If you haven’t already signed up for my exclusive 10-part ecourse on building your own HMO business making massive cashflow, then put your name and email address in the box at the top right-now! I guarantee that you will learn some valuable tactics that you can put to use in your own business.