Location, location, location! How to choose the right area for your rent to rent HMO and does it need to be close to where you live or work
Today we’re talking about how to choose the right area for your rent to rent HMO.
This episode is a response to questions asked in the Rent 2 Rent Success Secrets Facebook group.
Kay asked…
How to manage a rent to rent outside of your home location/city?
How to find a profitable area?
Richard wants to know…
How to establish if an area is “too” saturated for additional HMOs?
And I’m going to cover all that and more in this episode.
This is going to be a good one.
Let’s dive in to the subject of the right location for your first deal.
This one really gets people confused.
Where should you start?
People are doing rent to rent in cities all over the country.
Rent to rent works in most cities.
Of course, there are checks to make first.
And that's what I'm going to talk to you about now to make sure that it's going to be a good area for you.
You want clarity, so here goes.
Should you start near home or far away?
Kay asked about how to manage a rent to rent outside of your area.
You can do either.
For example we outsource the day-to-day management to our team so we could live further away from our properties because we’re not doing the day to day.
Judith lives abroad and has her rent to rent business managed by a property manager.
Do I recommend you start your first deal far from home?
No I don’t.
For the following reasons:
1. It really important when analysing the deal to know your area.
2. When setting up the property it works better when you can get there easily.
3. You keep the profit.
Can you do rent to rent far from home?
Yes you can.
Should you try doing rent to rent long distance on your very first deal?
Probably not.
How to choose your area
Choose an area you know well as your first area.
People overlook how much easier this will make the process, both at the beginning and after you have some properties.
Choosing an area you know well, close to your home, or work will give you so much more clarity than trying to get your very first property far away in an area unknown to you.
And because you don’t need to buy the property, you can do this even if you live in an expensive area.
If you live in the countryside, look at the biggest towns or cities to you.
Then you'll need to look at a few other things just to make sure that the location is really going to work well from an HMO perspective.
And as I discussed previously, if you’re using the model we suggest it doesn’t matter whether the area is Article 4 or not.
Go back and listen to episode 11 after this, if you haven’t listened to that one.
To see if an area works for Rent 2 Rent HMO we’re looking for the 4 P’s:
Practical
People hubs
Public transport links
Property types
Practical
Choose an area near to where you live or work
It needs to be within easy reach for you because if you're doing the setup and getting the property together at the beginning, it’ll run much more smoothly when you can get to it easily.
Later on you may choose to outsource, so it's up to you how much importance you put on that.
For us, all of our properties are in 30 minutes of where we are, although we have outsourced our property management.
For you, ‘near’ might be different.
‘Near’ is a distance which feels doable when inconvenient.
People hubs
Your property should also be near people hubs.
People hubs are things like:
Hospitals
Large employers
Universities
Shops, cafes and restaurants
People hubs are the reasons people are coming to your city.
The more people hubs there are in your location, the more resilient it is as an investment area.
Public transport links
In many areas most HMO tenants won’t drive.
In our area, we have a high percentage of drivers.
50% of tenants have cars.
Good transport links nearby are important.
And it’s even more important if you’re in an area, where fewer people drive.
Property type in your area and investment in your area
You want to check that there are HMO’s in the area.
You want to see signs of development and investment as well as demand.
Once you know your location has the essential four P’s:
Practical
People hubs
Public transport links
Property types
Kay also asked…
How to find a profitable area?
And Richard asked…
How to tell if an area is over-saturated
And a profitable area, and one that isn’t saturated, is one whether you can fill the rooms.
Let’s look at demand now.
SpareRoom
SpareRoom will show you the number of people looking for rooms, the number of rooms available, the rents and the conditions of the properties.
You’ll be able to see rooms from the lowest to the highest end of the market so you can assess where you want to position yourself.
There are limitations to SpareRoom though.
Not every room there is actually available.
And not every person looking for a room registers with the site.
It’s a starting point.
Now some people then say there’s a ratio such as 3 people looking to each room available.
I haven’t found that to be true.
The ratios in our area vary a lot throughout the year and it is a good area.
The final part of the puzzle is local intelligence.
Local agents and investors
You can also speak to local letting agents and landlords.
Remember not to put too much weight on what they say if they’re not HMO specialists.
Lots of HMO investors contact us about investing in Newport and tell us that local high street letting agents in our area have advised them HM'O’s don’t work here!
All it means is that HMO’s don’t work for them because they don’t have the specialist knowledge and systems.
Talk to HMO agents, landlords and others get a feel for the area.
You need to understand the areas to target.
And areas to avoid.
That’s why it’s important to understand your area.
Because that knowledge is the final part of the puzzle.
You look at the fundamentals:
Practical
People hubs
Public transport links
Property types
Demand:
Spareroom
Other landlords and agents
Your knowledge
Then I know some people like to put dummy ads.
We personally don’t do this.
If you’re nervous about moving forward that can give you the information you need.
The great thing about starting rent to rent is:
Your focus is one
You need just one property to get started.
Two average properties will give you a cashflow of £1,000 per month.
Brenda’s very first property cashflows over £1,200 per month.
If you saw Maria live on rent to rent real talk you’ll know her 2 properties cashflow £1,500 per month.
Do your due diligence.
And then take action.
And if you want to find out more about how we do it get the
Free Rent 2 Rent Success Training Guide and Masterclass.
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And remember,
Believe Bigger, Be Bolder and Be a Gamechanger!
See you next week.
Stephanie & Nicky
xx
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