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How Much Does It Cost to Set Up and Run a HMO Property? | Samuel Leeds - YouTube
Channel: Samuel Leeds
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in this video I'm going to be explaining
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what the setup costs are to bring your
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first HMO property and also what the
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ongoing management maintenance costs
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look like and how much profit you can be
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expected to have at the end of every
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single month my name is Samuel Letts and
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I am the author of the best-selling
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Amazon book by low rent hi how much do
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you need to buy an HMO property well of
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course it can vary massively it can go
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from very high to very very low you can
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buy properties without using any money
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at all using things like Lease Option
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agreements raising finance doing a joint
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venture but in this video I'm going to
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be explaining what the typical costs
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would be for a traditional HMO property
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that you bought with your own money so
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firstly how much do you need to get
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started to put into the deal we're going
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to work on the basis of a 25% deposit
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you can do it for less but then your
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interest rates will be higher so 25%
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deposit typically our HMOs are around
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about a hundred thousand pounds as a
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starting point for a four-bed HMO that
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will be 25 thousand pounds straight away
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for your deposit so if you haven't got
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twenty five thousand pounds you might
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need to think creatively on top of your
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deposit you've also got two legal fees
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now this can vary but your solicitor
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fees your standard UTV's it can just
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really vary but it shouldn't be more
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than a few thousand pounds you're also
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going to need refurb costs now we don't
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buy properties that need a big refurb we
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don't pop on sweets in all the rooms
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what we do instead is we furnish them
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and make them look amazing that way and
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we buy properties that are already in
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really good condition
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what does it cost to furnish your
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property and get a HMO ready well you're
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gonna need probably fire doors smoke
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alarms and furniture and maybe a lick of
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paint and you can typically budget for
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that around about 7,000 pounds which
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brings us to 32,000 pounds plus legal
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fees so whatever age how much will it
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cost
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I'd say about 35
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and pounds as a good starting point next
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question how much return you're going to
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get back you invest in thirty five
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thousand pounds what are you going to
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get back well let me say one thing to
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start with if you put thirty five
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thousand pounds in the bank your return
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would be next to nothing and your money
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would be shrinking if you put it into a
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normal house you might get around ten to
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fifteen percent return on investment the
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way that we do things we'll have to get
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at least 20 percent but usually closer
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to the thirty percent return on
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investments what's the breakdown of that
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and what does that look like what your
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rent is going to be on average and it
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will vary from house the house but a
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good starting point will be three
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hundred and fifty pounds per month per
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room which will leave you with a total
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monthly rent of fourteen hundred pounds
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of that fourteen hundred pounds you are
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going to have expenses it's not more
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yours to keep because of course you're
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going to have to pay the mortgage
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payments which might be around about 200
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pounds a month you're going to have to
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pay the bills which is gas electric
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broadband council tax water and that on
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a four bedroom HMO typically comes down
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to around about three hundred pounds a
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month and finally you're going to have
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to pay somebody to manage the property
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find you tenants and take complete
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responsibility in control of the
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property you can do this yourself but
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that's a lot of hard work so I would
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recommend using a property manager we
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can recommend people to you in fact
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whenever we pass a house on we always
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make sure we have a Power Team behind up
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so how much will that cost we pay twelve
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percent of the rent which will be one
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hundred and six
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pounds Perman however you've gotta round
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up because they will also charge you
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finders fees referencing fees for the
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tenants so we say about 200 pounds a
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month we'll have to go towards the
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management company let's bring this all
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together management company 200 pounds
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mortgage payments probably about 200
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pounds nails 300 pounds which together
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brings a total of 700 pounds profit and
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settlement pounds
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expenses which is heart the rent is
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going to you half the rent is going to
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expenses and that is our rule of thumb
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whenever you're buying hmm
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it's a 5 bit or a 6 then the rents a lot
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more the rent might be 2,000 pounds a
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month but we will always say half of
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that expect to go towards expenses let's
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do the math 700 pounds a month is 8400
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pounds per year you invested 35,000
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pounds that will bring you a grand total
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investment of 24 percent per annum which
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means that after four years you've got
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your money completely back and you've
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got your equity trapped in the property
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and of course you've got your capital
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appreciation as well I always recommend
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you in HMOs alongside the lease option
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agreements and no money down deals
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recycle your rent reinvest it and be
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creative and secure properties with no
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non if you do these two together there's
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no reason why anybody couldn't be
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financially independent within 12 months
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or less if you found this video helpful
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and you want to know more about HMOs and
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get to see exactly how we do things
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subscribe to this channel and also don't
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forget to get a copy of this book in the
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link below you'll be able to get this
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for
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free so enjoy hopefully soon and god
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bless you
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