Real Estate Investor Magazine South Africa Real Estate Investor Magazine - July 2017 | Page 50

UNITED KINGDOM Investing in High Income Yielding HMO’s Tips From an Expert BY WARREN BRUSSE A s a professional property investor, I believe property is the ideal vehicle for wealth creation. Over the past 16 years, I have been investing in both South Arica and United Kingdom property markets. In the last 4 years, I have expanded my income investment portfolio into house of multiple occupation (HMO) properties within the United Kingdom and this has, quite simply, changed my life. In this article, I share my insights and key learnings to enable you to think differently and shift your mindset. Yes, South Africans can invest in HMO’s within the United Kingdom, you just need to know where to look. Firstly, what is an HMO? Let’s have a look at the definition of a HMO. A house of multiple occupation (HMO) is a property rented out by at least 3 people who are not from one ‘household’, for example a family, but share facilities like the bathroom and kitchen. It’s sometimes called a ‘house share’. Why do I focus on HMO investments? Quite simply, I love the opportunity of increasing the rental income over an asset, which traditionally would have been purchased for a single buy to let family. In simple terms, I get more money from my capital investment. Which areas do I target for investment? I target investment areas where I see high tenant demand within a diversified economy with a diversified work base. I love seeing a healthy, strong mix between different sectors and different industries. My personal investment focus is within Birmingham, United Kingdom. Birmingham’s urban regeneration and transformation over the last two decades has been truly remarkable. Brexit and the digital revolution mean change is ahead for Birmingham’s economy. The city is underpinned by strong demand for housing, both from local buyers and those moving from I focus on properties located close to town centers, railway stations, bus terminals, retail shopping centers, large hospitals, universities and colleges. Being within a 10-minute walk of the town centre or a main transport node is critical. 48 JULY 2017 SA Real Estate Investor London and further afield. Large-scale regeneration and new development continues at pace, opening up new areas and changing the very fabric of the city. What types of properties do I invest in? I mainly focus on the large mid-terraced properties that have 3 bedrooms, 3 reception rooms, 2 bathrooms, a kitchen with a utility area and off street parking. I look to convert most of these properties into 5-bedroom or 6-bedroom HMO’s. What types of tenants do I focus on? I solely focus on proving high quality rooms to young professional working tenants. I personally see a real opportunity in serving this young, dynamic and flexible age group that does not want to be tied down to property ownership. Most other landlords focus on students and blue collar workers within their HMO investments. WHAT DOES MY CAPITAL PURCHASE COST LOOK LIKE? Purchase Cost £ 155,000 Project Management & Refurbishment £ 38,500 Stamp Duty £ 5,250 Furnishings £ 7,000 Survey & Planning Fees £ 4,000 Mortgage Application Fees £ 2,000 Solicitors Fees £ 1,500 Mortgage Broker Fees £ 1,000 CAPITAL PURCHASE COST £ 214,250 WHAT DOES MY MONTHLY CASH FLOW LOOK LIKE? Rental for 6 rooms Mortgage Repayment Property Management Other Operating Expenses NET MONTHLY CASH FLOW £ 2,340 - £