raheel with nameProperty booms are all very well. Investors can make a lot of money in them. But when you’re at the backend of a boom (as we are in the UK) the prices in most of the country are relatively flat. So what do you do to make money in property? Obviously, there are plenty of things you can do. You can trade, develop, convert, etc. But one reaction to the situation is to concentrate on letting, and find great yields. If you can’t rely on capital growth, then surely getting some excellent rent is a great way to make money, right?

Wrong, more often than not. If you have just come out of the backend of the boom, yields are low. Property values have risen, whilst rents may have stayed low. You get the same rent but it costs you more to buy the same property to do it, so you’re not getting anywhere, right?

Wrong again! There are still good yields out there. But often it’s not just a matter of looking for good yields in the usual places.  Right now, you have to be a little more creative…

There are several ways to do this. Firstly, you can concentrate on very high yield areas. If yields are very high, property prices have to be very low. If the property prices are very low then the properties are often in areas that are very, very poor. These are often far from civilisation and they also suffer from social deprivation problems. So if you want good yields, you’ve got to invest in rubbish areas, right?

Wrong. You can get great yields in good areas. You can do this with good quality houses that aren’t located in third-world parts of the UK. The yields are entirely a result of your style of investing. The last buy-to-let boom was all about single-family lets. You buy a house or flat, rented it out, grabbed your cash, and sat back. Simple! Surely things as fundamental as that don’t change.

Wrong. Times have changed, and investment strategies have to change too. If you want to make money in property now, you got to be more creative and cuter.

One of the ways you can do this is renting in unconventional ways. Yes, you can do holiday let or short-term corporate lets, but there is only ever going to be limited markets for these, and the tip-top standard these properties need to be in can pose some serious challenges.  We need to look for something with broader appeal, and more stable demand.

Make Money In A Flat Market With A High Yielding HMO

One great way to make money in a flat or falling market is to buying houses for multiple occupancy. For those who are not familiar with the term, what this basically means is that a property is occupied by people who aren’t all living together as a household. So for example, it might be six workmates, five students or two couples. But what is so great about these HMO’s?

Yield. Pure and simple. If you look in your local paper, the chances are you can rent a 1-bed flat for roughly £450, depending on the area you live in. But to get a double room in a house share might cost you £300. And that double room might just be the living room or the bedroom of the 1-bed flat that was on the market for £400. So Mr. Investor, you could have £400, or he could have £300 twice. Which would you prefer?

This has the obvious effect of leaving you a lot more money to play with after paying off your mortgage and that is what property is all about, right?

Wrong again. It’s all very well paying off your mortgage but what you have to do is look at your return on the capital employed; how much money you are making on your money. You need to make sure that you can cover not only the mortgage but also the wear and tear, heating, electricity, tenant management, etc., etc. All of which has to be paid in much greater quantities than with single family lets. But the end result is largely unaffected. HMOs do make very, very good money. A lot of the more serious landlords are doing them. However, they don’t have the bandwagon appeal the buy-to-let did a few years ago – yet!

The HMO property is one of the ways that more serious investors tend to invest. It takes more skill, more knowledge, and more effort to run HMOs than it does to run conventional single tenancies. But the flip side of this is there is much more money in it, especially if you know what you are doing.

Raheel’s Strategy

One of these serious investors is Raheel. He makes a serious business out of running HMOs. And he’s been training me how to do it, too. This is good, as there’s virtually nothing on the market like this course.

His strategy is quite simple. You buy properties slightly below market value, then refurbish them as HMOs.  After a bit of management, you sit back (minor exaggeration) and collect the rents – often at staggering yields. These properties often pay 8% yield after the mortgages have been paid. These numbers are just incredible for buy-to-let investors, who are used to making 1% margin on a property after the mortgage interest. What’s worse is that most buy-to-letters think this 1% is a very healthy profit level indeed!

You can quickly see that if you got a bit of cash to invest with and you don’t mind the hands-on style of business, then HMO letting can pay you great returns.

This course gives a good grounding in the ‘whys’. There’s no point investing if you don’t have a reason and a purpose to what you’re doing. Raheel’s been on a bit of a personal journey that’s brought him to this point in his life. It’s clear that he has now got very strong personal goals that he’s looking to fulfil through property investment. He is very focused on the need to inspire other people to have goals too. Without goals, we are all prone to drifting. I think this clarity of purpose is very, very important. The number one thing I look for in a course is a trainer who lives and loves the strategy they teach. It’s just so painfully obvious when someone’s training for a living, not training what they do for a living. Being a polished, professional presenter is a tiny part of what makes a good course. Being the real deal is so much more important, and Raheel scores top marks here.

The Course Structure – What You’ll Learn

I originally went on this course when it was run in Luton. I go on an awful lot of property training courses, and I get to know quickly what makes them work, and what makes them dull, confusing or just downright misleading. The original course format needed a bit of work, so I sat down with Raheel for about an hour helping him to re-format it. A course like this is desperately needed in the property investment world, so I felt it was worth my time to help him to build a really good course. I’m really pleased that he’s taken the suggestions I’ve made on board, as the course is now much improved. Incidentally, that’s not just my big-headed opinion – as always, I read the feedback sheets carefully, and spoke to other delegates. The difference is clear. Even a glance through the new slides shows how much more coherent the course is. There’s a clear structure and a strong focus on the details of real deals. Despite his ‘here’s what I did’ approach, he doesn’t miss the opportunity to touch on techniques that he doesn’t use, so you don’t miss a trick. There’s still room for improvement, and future delegates can expect an even better course than today’s highly-praised offering. To paraphrase Spinal Tap, the feedback sheets will have to go up to 11.

The bulk of the day is spent going through the details of deals he’s done and is doing.  The final portion briefs delegates on the necessary but tedious government rules that we all have to learn. Thou shalt not allow thy tenants to perish by fire. Etc.

In going through the details of Raheel’s deals, the objective is to understand both the physical structure of an HMO property, and the financial structure of the deal. I could go into detail about this here, but quite frankly I’m too lazy, so if you want to learn, go on the course. Suffice to say, there are some great tips, delivered in detail and based on Raheel’s solid business experience. You’ll learn how to:

1.  Find and buy houses that make 8% yield after the mortgage and costs

2.  Refurbish and remodel a house to make the maximum possible cashflow

3.  Stop tenants arguing and moving out

4.  Work with your local council to keep them on your side

5.  Plus loads of other stuff and you’ll meet nice people (probably).

The course concentrates closely on the nuts and bolts of HMO investing, and as a result Raheel doesn’t focus much on the peripheral matters of the business. This leads to a couple of crucial gaps. Firstly, he doesn’t go into a lot of detail about marketing. Granted, he does explain where he gets the deals from (e.g. leafleting), but he doesn’t give much further info about how to set up a marketing strategy. This is OK in a way, in that the course spends a lot of time on topics you won’t learn about elsewhere. However, if you’re relatively new to property, you’ll probably need quite a bit of help sorting out your marketing. Furthermore, there’s a notable lack of focus on raising cash. Raheel goes into a lot of detail about how the finances work, and how to run a successful HMO business.  However, this leaves one glaring omission – where do you get the money from in the first place?

He does mention various different strategies for raising cash (e.g. vendor finance, credit cards, private investors), but he doesn’t go into sufficient detail about how you can do this yourself. His investment strategy has relied on secured and unsecured borrowing, which works well for many people. In order to help more people, he’d do well to focus on techniques for investors who have already borrowed all they can. I’ve had a word with him about both these omissions, and I think he’s going to fill in these gaps on future courses. It might well be worth me going back a third time!

In Conclusion

If people are interested in HMOs as a business strategy, I certainly recommend the course as it’s one of the few that covers the topic extensively. Raheel clearly knows what he’s talking about, so whether you are a novice or an experienced investor, you should gain a lot from it.  However, you need to be aware that it’s not a catch-all introductory course, and you’ll benefit most from this course if you’ve got a bit of investment experience or at least a good knowledge of property buying and letting.

Overall, it seems that the course is well-promoted, as the clientele seemed to be much more knowledgeable than the usual ‘dumb-money’ get-rich-quick brigade you get on so many other courses. I think this is the right approach to take. HMO investment takes more knowledge, care and skill than conventional letting. Novices can be successful, but a bit of experience is definitely a big advantage in this game. The course benefits from the knowledge of the delegates, with lots of sensible questions and involvement from the floor. Raheel is friendly and personable, and handles the audience participation in a fluid and engaging way. His customers will always feel that they’re being treated as individuals, not just grinning cheques.

From a general knowledge point of view, it is probably even worth investors who are not involved in HMOs going on the course simply to brief themselves about this important aspect of property investing. Many people who do so may have their eyes opened and decide that the excellent yields that can be obtained are well worth the extra management effort.

Personally I don’t think that a HMO strategy is essential to running a successful property business. Nor do I think that it’s something that I am going to be likely to be doing in the near future. However, it’s certainly something that can pay great dividends, particularly in terms of giving a solid monthly cashflow to support your lifestyle and help you become a professional property investor. It’s not the right strategy for everyone, but it might be right for you.

The course costs £395, with optional mentoring at £1,000 per day. This places it at the cheaper end of the market.  You can book by calling 07887 606 506 or see Rachael’s website at www.hmo-expert.com.