Is Investing In HMOs Right For You? 10 Key Factors To Consider [#REWIND]

In today’s episode, we’re revisiting a special one—an episode I wasn’t sure I wanted to record but felt was essential. It’s important to make it clear that investing in HMOs isn’t just a highlight reel, and transparency is key when discussing what’s truly involved. HMOs aren’t for everyone, and there’s a lot to consider: Do you understand the value of cash-flowing assets? Does property investment excite you? Are your priorities focused on cash flow or equity?

If you’re already investing in HMOs, this episode will be a great reminder, and if you’re new to the world of HMO investing, it will help you decide if it’s the right path for you. I’ll break down 10 key factors you need to understand before committing your time and finances to HMOs. While I hope the answer is yes, it’s important to ensure HMO investing aligns with your goals and risk tolerance.

• 00:00 - Introduction to HMO Investing
• 03:05 - Understanding the HMO Landscape
• 06:11 - Key Considerations for HMO Investment
• 12:03 - Evaluating Your Interest and Risk Appetite
• 17:45 - The Importance of Long-Term Commitment

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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 (00:40.686)

In today's episode, we're going to rewind on a very special episode, one that I didn't really want to record, but felt like I had to. I'm aware that tens of thousands of you listen to the podcasts and new people find us every single week. Not sure where you've been for all these years, but I think it's important for me to make sure that the idea of investing in HMOs isn't a highlights reel. With so many people looking at what I do and what we do inside the community, I think it's really important to make sure that we're transparent about what's involved.

And the truth is, HMOs aren't for everybody. Investing in HMOs isn't right for everybody. There's a lot of stuff to consider and I think one of the reasons why I see some people struggle so much is because they haven't really considered and taken into account everything that's involved and whether that's actually suitable for them. mean, things like whether or not they understand the importance of investing in assets that pay them, whether they want money to work harder than maybe even a HMO will enable it to do.

Whether property is actually something that they find interesting on it. I love property, but not everybody does. It's much easier if you do enjoy it. What your priority is cashflow or equity. What's your long-term view? What's your appetite for risk like? There's a lot of stuff to think about before you can first determine whether or not HMOs is right for you. Now, if you're a long-term listener, hopefully by now you're already investing in HMOs and you've got a good and a substantial portfolio, but that's not to say that at some point your interest might diverge and you might want to go on to do other things, not necessarily bigger or better things, just different things as your plans and goals and life objectives evolve. But if you're new to the show, then you might well be new to investing in HMOs as well. And this is probably a great episode for you. It's probably a great episode for everybody, even just as a refresher for anyone already investing in HMOs. So today, what I'm going to do is rewind on this episode in which I break down 10 things that I think you really need to be aware of.

Ten things or ten questions I suppose to help you establish and ascertain whether or not investing in HMOs is right for you. I really hope that the answer is yes, but if it isn't, don't worry. Look, there's loads of stuff that we can all be doing out there, but I think this is an important episode. It's the acid test that you should be taking before you overly commit yourself from a time or a finances point of view to investing in HMOs. So without further ado, please sit back, relax and enjoy today's episode of the HMO podcast.

Andy Graham (03:05.486)

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 (04:16.008)

So today we're going to talk about whether or not investing in HMOs is right for you. So I guess if you're listening to today's episode, you're not a veteran. That would be weird because you're already investing in HMOs and you've been doing it for long enough to know hopefully whether or not it's the right thing for you. Today's episode is for people early on, early on in that journey, figuring out whether this is the right strategy for them, whether investing in HMOs is the right place to put their money, to invest their time and resources and what I've done.

Before today's episode, I've really given this a lot of thought. I've kind of reverse engineered what I think investing in HMOs is all about and what it takes and try to frame that in a way to help you establish whether it's the right thing for you. Because it isn't just about what you've got, what you can bring to the table to invest in HMOs. In fact, a lot of that can be figured out and in part, that's why the podcast's here. We talk a lot about raising private finance and there's lots of strategies to help you find deals.

So those gaps are actually the technical bits which are pretty easy to fill. That's not really what today's episode is about. So today, what I want to talk about are the 10 things that I think kind of define what investing in HMOs is all about. And hopefully with that, you can make an informed decision about whether that sounds like the thing that you want to be involved in, whether that's what you want to invest your time and hard earned money in or whether actually you should be doing something else. 

Now I don't know what that other thing should be, but I do know if I'm totally honest that investing in HMOs definitely isn't for everybody. So hopefully today's episode helps you newbies, helps you guys who've maybe just started or are thinking more seriously about investing in HMOs, but at the minute have other options, other things that you could consider doing instead. Now it'll pain me to convince you or see you go and invest in something else other than HMOs because I'd love for everyone to be investing in HMOs except the HMOs that I want to buy. But you get what I mean. So let's get straight into it. 

The first thing you need is to understand the importance of investing in assets that pay you. That is so important. And I put this in here because actually when I started, when I bought my first property, that really wasn't on my agenda at all. I actually learned this through my reading and through other people.

Andy Graham (06:40.782)

And actually through the results of investing in property, but actually at the time this wasn't on my radar. And I think if I, had said this to me, I would really understood it much more and really understood why investing in HMOs works so well. But not everybody wants to invest in brick and mortar assets, but if you're the sort of person who understands the importance of investing in an asset that pays you, then thinking about investing in HMOs is a really, really good start and there are lots of things or lots of other things that you can invest in. But you've often got a question whether or not they are assets. I'm not a big fan of crypto. I've got a bit, but I don't think that it's an asset class. I think that it's a speculative investment. I don't think that the underlying asset has the ability to perform in the way that I would like it to long term. It may turn out to do that, but I think at the minute it's so speculative. You can't actually say that it's an asset, I've probably just upset loads of people. Don't stop listening to the show. I'm no crypto expert. I don't pretend to be, nor do I want to be, but there's a stark difference, isn't there, between investing in some bricks and mortar, something physical that you can actually touch and feel that may well appreciate in value, that can generate you an income, that can generate you an income while you sleep, and we'll continue to do that because the track record of that performance is there.

It’s there for centuries. And in this case, when we're talking about property, maybe not necessarily HMOs, not quite sure how long HMOs have been around, but I think you'd get the idea. So if you understand the importance and in fact really value the importance of investing in assets that pay you, then thinking about investing in HMOs is definitely a good sign. 

Okay, number two, if you want or if you need your money to work harder, potentially investing in HMOs is the right thing for you. Obviously one of the beautiful things about investing in property is the fact that it's leveraged and it's asset backed security. So you can't just go and buy stocks and shares from the FTSE and leverage them. If you buy a hundred pounds with the shares, you've got to stump up a hundred pounds. But if you want to buy a hundred pounds with a property, you actually only have to stump up 25% of that. So 25 quid, extrapolate that to three or 400,000 pounds. If you want to buy a 400,000 pound asset, you don't need 400,000 pounds with the cash. You need

Andy Graham (09:06.766)

Let's say a hundred grams worth of cash, or maybe even less than that. If you want to buy 400 grams worth of stocks and shares, then you're going to have to have pretty deep pockets because you're going to need 400 grams worth of cash. Okay. So if you want your money, any money that you have to work substantially harder through leverage and through the ability to generate a fairly high yield, and that is definitely a spectrum. We might all have different opinions of what a high yield is, but I honestly think anything upwards of 6, 7 % is pretty high yielding. I know a lot of people will balk at that. They want 30 and 40. That's absolutely fine. Very difficult to find that sort of return with the security that property offers. So I think that if you want to get or need your money to be working much harder, then again, property is definitely the right thing. And HMOs, if you look at the property market, is probably one of the most attractive looking solutions. 

Okay, number three. Do you have a personal interest in property? This is so important. I meet so many people that tell me that they don't actually like property that much. It kind of makes me a bit sad inside. It's not easy enough investing in HMOs to do it just for the money. It's really not. It's not passive. I don't know where this thesis came from. I don't agree with it. I don't subscribe to it at all. I've been doing it for 12 years. So I think I've earned my stripes. I've got more than enough experience to know that that definitely is the case. Yes.

There are some things and jobs that we might have to do that take up far more time and energy, but by no means is investing in HMOs easy or passive. And I think that that's really important because unless you have a genuine interest in property, a genuine passion for doing the deal, for creating cool accommodation, for transforming old tired spaces, for dealing with problems and actually dealing with people because it's a kind of a people-centered business, then it's not for you. 

So, if you don't genuinely have an interest in property, honestly, I'd really, really encourage you to go and look at investing in something else. But if you are interested in property, if you walk around the cities and you're inspired by incredible architecture, if you're inspired by what people can do with spaces, if you're inspired by what people could do with color and materials and the experience that people can create in the environment, then actually you might be onto a winner. HMOs could definitely be for you.

Andy Graham (11:34.03)

For me, that's always been one of the strongest things for me. In fact, that was probably the key driver. That was the thing that pushed me into property. I had this sort of innate interest in investing in property or in property. I think it came from my uncle and my dad who were always doing a bit of self-building. My uncle was a builder and I used to go on building sites and stuff like that. So I think that that's where it came from in me. Okay, number four, if steady cashflow is your priority over creating big chunky lumps of equity, then investing in HMOs could well be the right decision for you. 

So let me be clear on this. A lot of people, they want their cake and they want to eat it. They want good, strong, recurring cashflow and they want to generate big lumps of capital through forcing the value up, through kind of developing that property and maybe commercializing it or adding loads of space. Now, yes, you can do both. And yes, there are lots of great examples of that. We really hand pick a lot of that on the podcast because I think ultimately that's the best.

If we can do that with our HMOs, then we're getting the cash flow and we're getting a lot of cash back out that helps it continue to scale up. But if I'm really, really honest, if purely recycling your capital is your priority above all else, let's say you're starting at zero and you need to borrow capital just to get into the game. Your absolute focus and priority has to be on recycling that capital. 

Now, if you simultaneously try and create a really good and stable recurring cash flow, you're gonna find the form a bit difficult. You kinda want your cake and you want to eat it. It's gonna be really difficult to find that property that gives you the cash flow that you need and allows you to recycle so much capital. I'm not saying that it's impossible. What I am saying is sometimes it's better to just accept that you need this even though you want something else. And for a time at least, maybe investing in something else, working on the capital strategy would actually be better than trying to do it all at once. So if steady cash flow is your priority over creating big chunks of equity, then I think HMOs is a better strategy for you. 

When I got started, it was never about buying 10 properties. It was never about that. It was actually about buying something, creating a really cool space, having something to my name, owning an asset and generating some cash from it.

Andy Graham (13:55.852)

It was over time that actually that property went up in value and I used my savings and started to get savvy about raising finance that then I was able to scale up. I didn't do it through forcing the value up so much and everything that I could just take my cash back out and do the next one. I think in all honesty, that is extremely difficult to do. We see very, very, very few examples of that. So just want to be really honest. If steady cash flow, is your priority over creating big chunks of equity, then HMOs is for you. But actually if you absolutely above all else need to be creating big chunks of equity, then maybe look at something slightly different, some small development stuff and learning all about that world first could be better. 

Okay, number five, HMOs is for you if you have a long term view. There's no point investing all your time and money in, into a HMO for short term returns. It's just not worth it. There are so many fictional costs now, you know, stamp duty and all the legal costs. It's really tough.

Unless we're holding long-term, it's just not worth it. There are easier ways to make money. Honestly, so many easy ways. Start an e-commerce business, whatever. I've got an online business. It's much easier to make money in a short space of time doing things like that than it is buying an asset, developing it, getting tenants in. But if you've got a really long-term view, that's where you win in property and that's definitely where you win in the HMO market. I bought my first one 12, 13 years ago now, still have it now, still journey up to cash every single day. It's over doubled in value.

I've won on that property because I've had a very long-term view on it and I've kept it and I've nurtured it. If I'd have cashed it in two or three years in, I really wouldn't be where I am now. So it's important to understand that you need to have a long-term view and having a long-term view means that it isn't just about buying the property. It's actually about what you do with the property, how you manage the tenants, how you actually run that business. And that really starts to stretch the idea for a lot of people just getting into HMOs for the first time about what is actually involved. Because trust me, the real work starts when you get those tenants in. 

Okay. Number six, if you've got an appetite for more risk and more risk than buy to let, then HMOs is your thing. If you've got a very, very, very low risk appetite, honestly, HMOs isn't for you. There is a lot more risk involved for a number of reasons. Not just because we're generally talking about bigger projects and more money, but actually just having the tenants in and managing that.

Andy Graham (16:20.5)

many tenants, the risk of things going wrong, like getting a bad tenant in and causing a lot of disruption or costing you a huge amount of money, the risk of awful things happening like fires. The risk is substantially higher. So if you've got a very low threshold to risk, then investing in HMOs isn't right for you. But actually, if you've got an appetite for a bit of risk, certainly more risk than there is involved in standard buy to let properties, then absolutely, HMOs could be for you. 

Number seven then, if you've got cash or have access to cash or capital, then investing in HMOs could well be for you. If you don't have any cash, if you haven't got your own capital, then you're going to need to get your hands on some. If you can't get your hands on some or you're not prepared to get your head around what's required to get your hands on some, so raise private finance, then investing in HMOs isn't for you. The cold hard truth is that investing in property requires a lot of cash, a lot of capital.

And HMOs in particular generally need a little bit more because we need to be able to, first of all, secure the asset and pay for all the legal costs and everything else involved. And then usually we need some cash to actually do the refurb and the refurb that we need to do on HMOs tend to be a bit bigger than the types of refurb that we could do and get away with on a small buy to let property. So we do need to be able to get our hands on cash to get our hands on capital. If we've already got it, great. This could be a good place to put it. 

If we don't have it, need to be able to find a solution and be prepared to commit to a solution to get our hands on it. And that means borrowing it, borrowing it in part from the banks, but maybe borrowing it privately. And some people are uncomfortable doing that. Some people don't want to do that. Some people don't want to ask. Some people don't want to do the work that's involved in actually going out and getting finance, putting a fundraising objective, all that stuff that we cover in the roadmap. Some people just don't want to do it. And that's absolutely fine. If you don't want to do it, that's absolutely fine. But just be aware that if you want to invest in HMOs, you absolutely need to be able to get your hands on a certain amount of capital to get started in the first place. 

Number eight, if you're committed to learning and delivering quality, then HMOs could be for you. If you're not bothered about learning and self-development and actually developing as a landlord, if you're not bothered about creating a quality product and customer service and things like that, then investing in HMOs isn't right for you. Because like I said earlier, real work starts when you...

Andy Graham (18:44.322)

get those tenants in. It's not when you find the deal or do the deal or do the refurb, it's when those tenants move in. And because this is a long play, we've got to be really committed to keeping up with things like legislation, keeping up with things like best practice, doing things to make sure that our property business, our HMO property business remains profitable. There are lots of changes as examples happening right now that we've got to navigate things like utilities. What are we doing to actually navigate the damage that these rising costs of utilities could be doing? You've really got to have your eye on the ball and that means committing to self-development, to learning, committing to improving your properties, to improving your project. This just isn't a set and forget strategy. If that's what you want, look somewhere else. But if you're prepared to do it and you understand that that's what's involved, then absolutely, HMOs could be for you. 

Number nine then, the penultimate one. If you can multitask, if you can problem solve, and if you've got an ability to manage a certain amount of stress, then HMOs could well be for you.

If those things are just not you. If you're not a problem solver, if you don't cope with stress particularly well, if you're not a multitasker, then maybe HMOs isn't for you. There are a lot of moving parts when it comes to HMOs. We've got all sorts of things to think about. Enquiries and viewings, paperwork, we've got legislation, certificates, inspections. All the while we're managing cash and cashflow, paying mortgages, chasing rents. There's a huge number of things that we have to be keeping our eye on.

It's a really mechanical business and that needs a lot of time and a lot of attention. Now if you're really clever and we cover all this stuff in the roadmap, there are lots of systems and processes that we can put in place to automate and delegate and simplify and often eliminate things that we think are required. But we do need to understand that a lot of multitasking, a lot of problem solving, and at times a lot of stress needs to be managed. Tenants can just be difficult. Things go wrong. Leaks happen.

I would say probably once every couple of weeks, something like a leak pops off in one of our houses. Now I've got a large portfolio and the more properties you have, the more that happens. But that is just part and parcel of it. You need to be well-prepared and be able to manage that sort of stress. Okay. If that's not you, then maybe something a little more hands off would be better. 

Okay. Finally, number 10. If you're prepared to work hard enough to not have to work again, then HMOs could be the right thing for you.

Andy Graham (21:10.124)

This, I think, encompasses a lot of what we've covered today. There's a lot involved in investing in HMOs. There are lots of moving parts like we've discussed. It isn't just about doing it at the point of purchase, doing that refurb. It's an ongoing process. You will get better. You'll develop contacts and people to help you and support you. You'll develop your confidence, but you have to be prepared to work really, really hard at the beginning. If you're just getting started, getting all these pieces in place, getting the funding, finding the deal, finding the right builder.

Managing the problems that come up on a refurb, all of this stuff can be really, really, really difficult. It doesn't get substantially easier on the second or third one. It gets a little bit easier. The more you do, you harden up a bit, you grow a thick skin, but you have to be prepared to work really hard to get those first few properties up and off the ground and generating cash. When they are, only at that point, if you want to, can you start to sit back a little bit. And to get a few properties off the ground, it could take you a few years. really depends on how aggressive, how much capital you can get your hands on and your ability to find good deals. You can do it much more quickly. You've got to be prepared to work hard enough not to have to work again. That is just what investing in HMOs commands. 

So there we go. 10 ways to know if investing in HMOs is the right thing for you or not. Now, hopefully you've listened to that and actually you can see all that in you. Hopefully that's inspired you and actually fired you up. Hopefully, that's given you the confidence that investing in HMOs is right for you. But be honest with yourself. If there are things that we've covered in today's episode that you don't think are a good fit for you, maybe you aren't a good fit for them, then perhaps consider doing something else. You can always come back to investing in HMOs in the future if things change, but you need to make sure that it's the right thing for you. Because honestly, it's not worth getting in, spending all of that money and time and effort to then figure out that investing in HMOs isn't right for you. 

So let's recap. How do we know if investing in HMOs is the right thing for us or not? Number one, if you understand the importance of investing in assets that pay you, then HMOs could be right for you. Number two, if you want or need your money to work harder through leverage and getting high yields, then HMOs could absolutely be the right thing for you. Number three, if you have a personal interest in property,

Andy Graham (23:38.446)

then investing in HMOs could be the right thing for you. Number four, if steady cash flow is your priority over creating big chunks of lumpy cash and capital and equity, then investing in HMOs could be right for you. Number five, if you've got a really long-term view on what you're doing in this strategy, then investing in HMOs could be for you. Number six, if you've got an appetite for more risk, and I mean more risk than standard buy-to-lets, then HMOs could absolutely be for you. Number seven, if you have or have access to capital to get started, then HMOs could absolutely be for you because you're gonna need it. Number eight, if you're committed to learning and delivering quality over the long term, creating better services and investing back into your business, then HMOs could be for you. Number nine, if you can multitask, if you can problem solve, and if you can manage stress, then HMOs could be few. And finally, number 10, if you're prepared to work hard enough to not have to work again or at least not have to work much in the future, then HMOs could absolutely be for you. Like I said, hopefully today's episode has confirmed that HMOs are right for you. 

Hopefully this has fired you up. Hopefully it's inspired you to go out and start really doing what it takes to invest in HMOs. And if it has, if today's episode has actually given you the confidence to say, yeah, you know what, it is for me and I am on the right thing and I am looking at the right track and I need to go down this path and I need to make it happen, then the next step is actually not that difficult. It's just figuring out the technical bits that I touched on very earlier on in this episode, getting the funding in place, how to find deals, how to plan refurbs, how to create great products, the standard test of time, how to find tenants and get them in and how to actually run and manage HMOs and all of that can be learned. It's not rocket science, it really isn't.

And of course the roadmaps there to help you all of that stuff, finding the finance and how to find deals, figuring out whether it should be students or professionals. All of that detail is there. It's available to you at either no cost or a very low cost. Certainly in the roadmap, it's very low cost. You can find all the support you need inside the HMO community. I'm there. You can come to member masterminds if you're a member of the HMO roadmap and you can actually talk to me and our members and we can help you. We can actually look at your personal circumstances and

Andy Graham (26:03.788)

what you're going through and what you're experiencing, what you need to do to make it all happen. All that support is there to make this much easier. It doesn't have to be as hard as you might think it is or it's going to be. So I guess that brings us to the end of today's episode. I hope you enjoyed it. I actually really enjoyed recording today's episode because it made me really think about why I love investing in HMOs so much. And it isn't just the whole Instagrammable, kind of making great rooms and making great properties. It's all of that stuff for me.

If you've got 30 seconds to leave a quick review of the podcast and really appreciate it, you can leave a review on Apple and on Spotify now. Tell us what you think. And honestly, it helps more than you could possibly know. It really does help us continue to bring great guests onto the show as well. And I've got some fantastic people lined up later this month and next month, which I'm really, really, really looking forward to bringing onto the show. Of course, if you haven't joined, come and check out the HMO community. That's our free group on Facebook. I know a bang on about it all the time, but honestly, it's a fantastic resource.

That's it for me. Don't forget, I'll be right back here next time. So join me then for another installment of the HMO podcast. 

That's it for today's episode guys. Thank you for tuning in. Now don't forget that if you want to level things up, make sure you head over to the HMO roadmap.co.uk. We've got one of our biggest sales ever on at the moment and you can take advantage of everything that we have got for offer inside the HMO roadmap. 20% off, you'll never get an offer like this again. Get your hands on over 70 case studies from the community. Get your hands on all of my downloadable resource and templates that not only just save you hours and hours and hours of time, but will save you literally thousands of pounds having to create them yourself. InvestedX, loan agreement templates, rent to rent, agreements, welcome packs. We've got everything you could possibly need. We've got the deal stacker. So if you're looking at deals, you want to do the math, you want to appraise your deals.

I've got it all inside the HMO roadmap waiting for you. Stack your deals, compare them side by side, track the key metrics, the most important pieces of data to you. You've also got expert master classes from everybody, including Ellie, our mortgage broker, Andrew and Mary, our architects, planning consultants, interior designers, and a whole lot more. 60 lessons from me teaching you step by step how to start, scale and systemise through the process of finding more deals, funding your deals, raising private finance, fixing and refurbishing.

Andy Graham (28:27.374)

finding and filling them with great tenants and then getting into the flow of good property management to actually monetise your HMO investments. Trust me, for less than the price of a cup of coffee every single day, this could be the single most important decision that you make in 2025 to help you on the journey of building a really incredible and really successful HMO property business. So go and grab that offer before it disappears. Just head to theHMOroadmap.co.uk. I promise you will not regret it.

That's it guys, thank you once again 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 instalment of the HMO Podcast.