How To Refurbish HMOs With Tenants In Situ? [Community Q&A]

In this episode, I'm answering a question recently asked by one of our members in the HMO community. It was a great question that led to some interesting discussions, although people had different opinions.

Steven asked how to go about buying an HMO with tenants in place that needs some cosmetic work. 

As you can imagine, the answer isn’t simple, and there were different views. If you’re thinking about buying an HMO yourself, whether it comes with tenants or you have the option to do so, this is definitely something to consider.

We’ll dive into this topic, and I’ll share my best advice on how to handle it.

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Transcript

Andy Graham (00:02.67)

Hey, I'm Andy and you're listening to the HMO Podcast. Over 10 years ago, I set myself the challenge of building my own property portfolio. And what began as a short -term investment plan soon became a long -term commitment to change the way young people live together. I've now built several successful businesses. I've raised millions of pounds of investment and I've managed thousands of tenants. Join me and some very special guests to discover the tips, tricks and hacks, the ups and the downs, the best practice and everything else you need to know to start, scale and systemise your very own HMO portfolio now.

Andy Graham (00:40.652)

In today's episode, I'm answering a question that one of our members recently asked inside the HMO community. It was a great question, one that I've seen asked before, and it got some really interesting answers, but not everybody was in agreement. Steven asked if he was buying HMO with tenants in situ, but needed a bit of a cosmetic refurb, how would he best go about doing this? Well, as you can imagine, the answer isn't straightforward and there were some differences in opinions.

If you're potentially buying a HMO yourself, maybe it's coming with tenants in situ or maybe you've got the option of buying it with tenants in situ, then understandably, this might be something that you need to think about too. Well, today we're going to tackle this and I'm going to give you my best possible advice. Please sit back, relax and enjoy today's episode of the HMO Podcast.

Hey guys, it's Andy here. We're going to be getting back to the podcast in just a moment, but before we do, I want to tell you very quickly about the HMO Roadmap. Now, if you're serious about replacing your income, or perhaps you've already got a HMO portfolio that you want to scale up, then the HMO Roadmap really is your one -stop shop. Inside the Roadmap, you'll find a full 60 lesson course delivered by me,

teaching you how to find more deals, how to fund more deals and raise private finance, how to refurbish great properties, how to fill them with great tenants that stay for longer, and how to manage your properties and tenants for the future. We've also got guest workshops added every single month. We've got new videos added every single week about all sorts of topics. We've got downloadable resources, cheat sheets and swipe files to help you. We've got case studies from guests and community members who are doing incredible projects that you can learn from. And we've also built an application just for you that allows you to appraise and evaluate your deals, stack them side by side and track the key metrics that are most important to you. To find out more, head to theHMOroadmap.co.uk now and come and join our incredible community of HMO property investors.

Andy Graham (02:39.95)

Okay, welcome back gang. So today we're going to be answering a question from the community. I actually thought this was a great question. I've seen it asked before, but this time it got some really good answers from the community. So today I want to share some of that advice and feedback from our members. And of course, I'm going to give you my thoughts on this scenario. Now, before we get into today's episode, I just want to share a cheeky little review that we had left on the podcast recently. Let me just pull this up in front of me. Gives me that warm, fuzzy feeling inside, but this was recently, bud_ribbet. Thank you Bud. Bud said, Andy, thanks for the wide range of topics you cover. This is a truly educational podcast and one I listen to weekly without fail. There are always useful lessons to learn, tips, great content, giving me more ideas to consider and action, a resource any HMO investor shouldn't do without. thank you Bud. Bud Ribbit, that means a huge amount. Me and the team, in fact, it really is lovely to see you guys, reviewing the show, honestly, it means more than I can possibly tell you. If you haven't already reviewed the show, if you haven't subscribed, make sure you do that way you won't miss any new episodes. But if you haven't yet left a review and you're a regular listener, if you enjoy the show, if you find it valuable, please, please, like, put there. If you've got 30 seconds, leave us a quick review. It means so much to us and it really does help us spread the message and all the great work that you guys out there in our community are doing. That was just a nice one I wanted to share with you guys today. 

So let's get stuck into today's episode. So the way we're going to do this is I'm going to walk you through some of the answers that our members of the community shared in response to Steven's question. And then I'm going to share my thoughts on their answers. And I'm going to share kind of a synopsis, if you like, of my advice on this scenario as well. And if by the end of the episode, you think we've left anything off the table, if you've got any extra ideas, thoughts, advice, experience, come over to the community and make sure you share them too.

Because we want to know what you think as well. So here's some feedback from our community members. And by the way, this is in no particular order whatsoever. Damien, one of our top contributors in the community. Damien asked for a bit of sort of clarity on what cosmetic work actually is. Damien doesn't think that cosmetic work and HMOs go hand in hand. And he sort of went into a bit more detail. Do you know if the electrics are up to standard? Damien asked. What about the fire and emergency lighting? Think Damien sort of saying once you

Andy Graham (05:03.146)

start working HMO, can soon turn into a big project. Floors being gripped up, fire doors, insulation, sound insulation. These are all things that Damien was highlighting. Damien also asked what the room sizes were, asked about walls and chimney removals and stud walls. But in Damien's opinion, impossible when you have tenants in the property. So I think Damien also added to this kind of the point of buying a buy -to -let is kind of to make money on it. So waiting for tenants to leave one by one so that you can kind of do any work in each room as somebody leaves. Damien thought that was bad business. He thinks buying an empty property and bringing it up to of HMO standards, bringing it up to kind of a good spec, he thinks that's the only way to go. Now, I think Damien asked some good questions here and I think what it does is highlight that first of all, a cosmetic refurb might mean something different to you and to I and to other people as well. So I think in fairness, it's probably useful to try and determine or kind of ascertain exactly what a cosmetic refurb is. Now, like in my opinion, a cosmetic refurb is something that is absolutely non -structural. I'm not getting into any of the kind of the fabric of the property. It's all, I would say, aesthetic. So decorating, new flooring, that sort of stuff, new furniture, very much the stuff that you just see. Even kind of the frames on the wall and a bit of artwork and that stuff. That's what I would say is cosmetic, super, super light touch. I think a step up from there would be a light refurb light refurb for me that plus maybe getting into the bathrooms and the kitchen, maybe a bit of of retiling, maybe swapping some appliances in and out, maybe new work tops, maybe kind of wrapping or spraying the kitchen down, maybe kind of some window panes that are blown and some of that stuff as well. Things that just take more time to organise and to kind of get into place.

There might also be some minor bits of kind of electrical or plumbing works to do along with that as well, but certainly nothing structural. And again, not really kind of anything to do with the fabric of the property. It might kind of mean just kind of putting a couple of radiators in some different places. That might mean there is a little bit of chasing and patching in. I think as part of a light refurb, that would absolutely be fine. But beyond that, heavy refurb. So heavy refurb were into really getting into the fabric of the buildings.

Andy Graham (07:28.236)

taking walls down, putting structural support in, changing floor plans, really kind of getting into the electrics, maybe even rewiring, replumbing, new ensuites, new bathrooms, of finding sort of soil routes through the property and things like that. And obviously depending on the size as well, that's going to have some sort of an impact. Just kind of an old property that's got wood chip wallpaper on right, like cosmetic there is probably just painting it, getting wood chip wallpaper off the wall.

Anyone who's done it will probably know that actually turns it to a bit of a nightmare usually, because it starts to pull the wall off and then all of sudden you're into kind of skimming the walls, then you're thinking, well, if I'm skimming the walls, shall I just do the skirts and the architraves as well at the same time? Should we just do kind of a bit more of the electrical? Before you know it, you're into kind of a light to heavy refurb. But anyway, I think that at least gives you my kind of thoughts and a bit of a steer on what I think cosmetic is. But I think cosmetic is really, really light, okay, very much just kind of surface level stuff is what you see. Let's keep walking through some more of the feedback. 

And by the way, if you find this kind of new and slightly different format of the podcast is useful and interesting and valuable, please do let me know. I thought it'd be great to kind of just bring more opinions, more experience from you guys from the community onto the podcast as well. Alice, another top contributor in the community asked whether or not you really do need to get the tenants out to do cosmetic work. Alice is probably thinking along the lines of me actually of light stuff. But then Alice also made some points, look, you know, if you do need to remove tenants, you've got to really think about getting your documentation right, section 21, serving your notices in the correct way. And I think that this would, for most of us, be a bit more straightforward if it was our property and our tenants and we kind of knew them and we were comfortable with them and those relationships. If you're buying a property and then having to immediately serve notices, you don't necessarily know what you're buying, do you?

in terms of the tenants and the relationships. And there's no way to know whether or not those tenants are going to be okay with it, extremely displeased with it, whether you're going to kind of pour fuel on a fire that's already been going. But I guess that's kind of what Alice is just trying to highlight. And then she sort of said, actually, you really ought to get a specialist to draw up notices and things if you are going to do this and if you don't have the experience. And actually, I think that's really good advice. You have absolutely got to get that kind of legal bit right. If you do actually want to remove tenants to do works.

Andy Graham (09:52.088)

I mean, just to add to this, look, if it was a scenario where you thought you had to remove tenants to do whatever works you needed to do, I would absolutely be asking for vacant possession if this was a property I was buying. Alice also said, look, just sometimes just talking to tenants, letting them know your plans that might prompt them to move on if that's what you or they want or are okay with. And then Alice said, look, maybe you could do the common areas and then each room when they become vacant. I actually thought that was really sound advice. And then she said, good luck.

It was nice of Alice. Another top contributor in the community, Tu's got a load of stuff in Birmingham. I don't know Tu personally, but follow his stuff. Tu said, do the works once the place is emptied and start afresh. Higher rents due to the reset, clean slate, no nasty surprises either from the property or from the legacy tenants. I think that that is a huge amount of experience talking there. I suspect Tu has probably bought lots of HMOs with lots of tenants potentially in situ and by the sounds of it, prefers not to do it.

And then she actually left some really kind of good balanced advice. He said, look, there are pros and cons to each approach and it all depends on your personal circumstances and what type of headache you want to deal with. I thought that was quite funny actually. Moving on, one of our community members, Richard suggested that maybe you could vacate one room and then move the rest of the tenants around. Marie, another top contributor in the community asked, can't they stay in if they're good tenants? Can you just do a room at a time?

There was a bit of back and forth here about what about the communal areas. But Maria South said, look, I've just a mind and there were no issues. So speaking from experience there, Tony said he's refurbished with tenants in situ to just be mindful that it's a lot more work and hassle as the property has to remain in the safe and habitable condition. I was upfront with the tenants when I purchased the property and gave them plenty of notice before starting work. So they have the option to find somewhere else if they wished. They all stayed where they were and they were fine. That's really good advice actually, I think offering tenants, the option usually goes down quite well. But what you've got to be mindful of is if you do offer tenants an option, they may well choose the option that you don't want. And sometimes it is the case that you need all the tenants in the house to agree on that same option. Otherwise it doesn't quite work. One more from the community then, Oli simply said, just get the vendor to serve a section 21 before exchange. I think Oli's insinuating that just kind of taking the property actually with a vacant possession.

Andy Graham (12:15.852)

would probably be the best scenario. So as you can see, a few different opinions from our community here and all based on different experience. So what do I think? Well, first of all, think some of the questions around what is a cosmetic refurb, what do you actually need to do here, are really, really important. And in fact, I think without that context, it's really difficult to give any accurate advice. If it is the case that it's a purely cosmetic refurb,

aesthetics, it's just what you see on the face of things. It's just painting and decorating, maybe some new carpets, bit of new furniture, smart works on the wall, maybe mounting a new TV, something like that. If it is purely cosmetic, I think that that can be done with tenants in situ. However, if that is the case, then my next question would be, is it worth it? Is it really worth spending money if actually you're going to have the same tenant paying the same rent in that room? So.

In this scenario, I think it would probably be best to perhaps just do the communal area and get everybody on board and do it as bit of a freebie. Do it as a gesture of goodwill, if you like, for the existing tents. But the cool thing is once you've done that there, that looks great. And the next time that one of your rooms becomes vacant, that communal space is on show. It's looking better. You're going to enable yourself to kind of elevate the rents a little bit. However, I probably would refrain from doing the individual rooms at the same stage.

And I'd wait for them to become vacant. Unless you're going to negotiate an increased rent on each one of those rooms. I just wouldn't bother. It's actually quite disruptive trying to get into a tenant's bedroom while they're living there. If you need to replace carpets, redecorate, it's quite messy work. It's disruptive, isn't it? If there's nowhere else for them to go in the house for a few days in one of the other rooms, which I don't think is totally unreasonable if they're getting a bit of an upgrade. I just think it's too disruptive. And I think combined with the fact that you'd have to almost

want to justify this with an increase in the rent, it's probably not gonna go down that well. So if it is super cosmetic, I would just wait till that room becomes vacant. As soon as it becomes vacant, I'd get in there, I'd add a little work list, give it to the guys, get it done, have it done in a day or two, and then I'd get it on the market with new photos. You might lose a little bit of time while you do that, but actually, if you think about the rent that you're gonna save of not having to vacate

Andy Graham (14:36.394)

everybody now to do that, it's probably gonna stack. Is it a perfect scenario? No, obviously not, but on balance, it's probably okay. If you're happy with the tenants, if you're happy with the income it's generating, but you can see that over time it is going to need improving. It's not a completely bonkers idea. You could absolutely do it. And you know what? With our professional HMO portfolio, this is absolutely what we do. When I was managing a very big portfolio with lots of professional HMOs, it was the only option. We simply couldn't vacate entire houses. So when we would need to do periodic improvements, we would just have to do it when a tenant exited that house. And if you use pretty standard pallets of paintwork, furniture, of carpet and flooring, it's pretty easy to go back to your suppliers every time and just say, hey, we need 15 square meters of that. I need five liters of whatever the paint is and off you go, give it to the guy. So if it is purely cosmetic, that would be my advice.

If it's more than cosmetic, if it is like a few people have suggested more about some of the fire safety stuff, maybe some of the license requirements, if it means tackling a bit more of a fabric of the property, I think it probably is best to get all the tenants out and then get your team in with a clear schedule of works, get them to smash the workout. If it's a light refurb, depending on the size of the property, you can still do that relatively quickly. Get it photographed, get it looking absolutely incredible stage the rooms, make it look fantastic, then get it on the market and you'll really be able to get that premium rent. As some people in the community have said, that is really the only way to get that premium rent. It's very difficult to do it any other way. You'll also just be able to make benefit of the scale of economies there because you're getting the whole house done. Then you can get a photographer in, maybe a videographer. You can get everything looking absolutely wicked at the same time and then you've got all of your marketing stuff, all of your evergreen photographs and videos that you will need for the next five plus years. So for me, that's probably the way to do it. Now, go back to the original question. Steven was buying a property that had tenants in situ. So my advice in that scenario would be if it needs that sort of works, I would absolutely be insisting on vacant possession. As some people in the community have said,

Andy Graham (16:58.978)

taking on the responsibility of removing tenants from properties, essentially evicting tenants, it's a hassle. You've got to do it right. In fact, it relies on the paperwork such as deposits and stuff having been served in the correct way by the previous landlord. So there's a lot of stuff that you need to take into consideration and look, it's just going to take time and that's all that your costs and your expense. So the cleanest and simplest solution, if the seller is on board, if it's not too late to negotiate this.

I would absolutely be buying it with vacant possession and go and do your thing, put your standpoint, push that rent up, force that rent up. It's one of the best tools that you've got to really enhance your cashflow and create capital by going in there and doing that work, forcing that value up. And this really is the very best way to do it. anything sort of beyond purely a cosmetic refurb, anything light and certainly anything heavy.

I wouldn't want tenants anywhere near it. Some people have said safety considerations. You've got to be habitable. You might need to turn water off, things like that. So there's a lot of stuff that you've got to take into account. So my advice would be purely cosmetic. I would do the communal areas as long as the existing tenants are okay with it. Why wouldn't they be? And then I would just do each room as it comes up, working off a standard pallet. If it's any more, if it's a light refurbishment or a heavy refurbishment, then I'd be asking.

to get all of the tenants out, ideally buying with vacant possession, getting my squad in, doing that work, forcing that value up, getting it on the market, and taking the benefit of that increased rent and all my great marketing stuff. So there we go, guys. What do you think? What advice would you share? Have you bought property with tenants in situ? Have you done refurbs or any sort of work with tenants in situ? Come and let us know inside the community. If you haven't already joined, it's our free group on Facebook. There's 10,000 members now.

Conversations popping off on all sorts of things. I think this might become a regular feature of the show. If certainly if you guys enjoy it, if you're finding it valuable and interesting, let me know. But anything else you want to add on this, come and let us know inside the community. Thanks to Stephen for his great question. Thanks to all our community members who shared their advice and feedback. And thanks to you for listening. That is about it for today's episode. Don't forget though, if you are...

Andy Graham (19:19.884)

investing in HMOs, if you're building your own portfolio, maybe just at the beginning, maybe you're really in the midst of scaling things up, make sure you check out the HMO roadmap, everything you could possibly need on refurbishments, on buying, on managing tenants, how to find and fund deals, raising private finance, getting commercial valuations. Plus we've got over 70k studies from community members, dozens and dozens of my downloadable resources and save you a thousand pounds and hundreds of hours of time trying to create it for yourself and a load more. Trust me, if you're investing in HMOs, it is an absolute essential. It's a no brainer. Go and check it out. That's it guys. Thanks once again for tuning in and don't forget that I'll be right back here in the very same place next week. So please join me then for another installment of the HMO podcast.