Buy a developer, not just an HMO…
If you purchase a tenanted HMO, a ‘ready-made’, established product, then the best advice BY FAR is to ‘buy the developer’, not just the HMO.
What do I mean by this?
I have so many exceptional HMO developer clients that are producing quality properties for their own portfolios across the areas that they are active.
If a developer is creating an HMO for themselves then you can rest assured that they are undertaking due diligence to a very granular degree – their own experiences and knowledge will mean that they assess the HMO viability from as many angles as possible and create a product that is sustainable, profitable and secure.
From fundamental design features, the location, the amenities, the positioning in the market and the quality of the development to who will manage it, how the running costs will be optimised and the ongoing maintenance costs will be minimised, quality HMO developers leave no stone unturned.
Getting to know who these developers are can be one of the best ways to ensure your next HMO purchase is the right one.
These HMO developers sell too – this doesn’t have to be as their main strategy but a regular flow of stock is available nonetheless.
Why do HMO developers sell when they are essentially portfolio building?
They may sell in a new area to ‘create a comparable’ for future refinancing…
They may be using the ‘create 3, keep 2 sell 1’ strategy (or similar) in order to keep more capital moving for new projects…
They may simply have a new large project that needs funds releasing to pursue…
Either way, the HMOs that come from these developers are the best in the business.
To use an example of some developers that I’m currently working with…
We have a ‘get to know the developer’ open day planned on a brand new HMO in the East Midlands where new investors can see his latest development as it approaches the final few weeks of development.
If an investor is interested in this property, they could potentially have a say in the final finishes, who lives in the property and have full transparency over the final sign offs from building control, licensing and the HMO managing agent – that’s a great place to be in as a new investor.
The same developer is also allowing access to a couple of his established HMOs locally so the the visitors on the open day can see how their potential new HMO will look in 1, 2 and 3 years time.
Access to a crystal ball like that could be invaluable to an investor.
So many HMO developers are creating a brand – synonymous with quality and innovation – it’s this brand that I want our investors to buy into.
If you do this you don’t just get a property, you get;
- Years of experience and knowledge
- Often the best HMOs in your chosen area
- Accountability and visibility
- Access to better managing agents and maintenance teams Potential for more deals
- More transparent due diligence
- A say in how the development looks
- Plug into an existing network in the area
“buy a developer, not just an HMO”
