The 60-Second Check: How to Instantly Filter Bad HMO Deals Out

If you're spending way too much time looking at HMO deals that just don’t stack up, this episode is for you. I’m breaking down the exact 60-second check I use to quickly filter out the rubbish - and trust me, this will save you hours (and probably a few headaches too).

Here’s what we cover:

• 02:20 - The Importance of Efficient Deal Filtering
• 05:42 - Key Metrics for Evaluating HMO Deals
• 11:47 - Understanding Planning and Its Implications
• 17:39 - Refurbishment Costs and Their Impact on Deals

These quick checks will save you hours, stress, and potentially a lot of money. If you want to stop wasting time and get focused on deals that actually work—tune in now.

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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 (00:40.662)

If you find you're spending way too much time looking at deals that turn out to be bad deals, then today's episode is definitely one for you. This will save you hours. Today I'm breaking down the exact 60 second check that I use to instantly filter out bad deals. This way, you can focus on the good ones that are actually worth your time. So if you're sitting there thinking, this is a bit of me, I am spending too much time looking at deals that turn out to be non-starters, then don't go anywhere. 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.

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Andy Graham (02:23.568)

OK, welcome back. So today we are talking about the 60 second check that you can use to instantly filter out bad HMO deals. And this way you can focus on the good ones, the ones that are actually worth your time. Now, before we get into this, I've got six pieces of great advice to share with you. First of all, I just want to say, if you're a regular listener of the show, welcome back. Thank you so much for being here. But if you're a new listener, well, after 316 episodes, it is great to finally have you? I'm not sure where you've been all that time, but we are, of course, the show that does all things HMO. 

And if you are at that earlier stage of your journey, perhaps just one or two or a few deals in, but you're finding it difficult to find the right thing, perhaps taking a lot of time, pouring hours into looking at deals, scrolling Right Move and other portals, going to viewings and just not quite making it stack, then today's episode is definitely going to help you. This is a real skill. And today I'm hoping to really speed the process up for you.

Efficiency is a huge part of this game. There's no secret that property is a slow business. It's slow. It's painfully slow at times. So anything that we can do to try and speed up what we do to try and drive efficiently through this business is a huge win, certainly in my book. So today I'm going to help you try and do this. And if you employ the tactics that I'm going to give you today, this will actually make a massive impact. And actually for some people, this really could be the difference of whether or not they stick with it because when you look at a lot of deals and so many of them don't work, it can get really tiring. It can get exhausting, get frustrating. It can get demoralizing, demotivating. We want to make sure that that doesn't happen because that is actually one of the biggest risks. 

And in a market like this at the minute that is quite competitive, a little bit sort of questionable, not everything is predictable. It's fairly turbulent at the minute. It can be very, very difficult. So we want to make sure that you are able to just separate the wheat from the chaff. And today I'm going to help you do that. Now, let's be honest. Most of the deals that I get sent, they look all right at first glance. I'm sure you've seen loads of these deals as well. The numbers usually look pretty good. Good headline, rents, usually some sort of value add potential. This might just be stuff that we're seeing listed on Rightmove, but certainly stuff that we might be getting sent from sources or on investment lists and things like that. And we can often spend quite a lot of time on these sorts of deals, running the figures.

Andy Graham (04:44.505)

Speaking to our broker, maybe even going to viewings, speak to our architects, planning consultants. There's a whole array and big body of work that we can do only to realize further down the line that it doesn't stack up. And it probably never stacked up in the first place. And that can be incredibly frustrating, but I gotta admit that it's our responsibility. We need to be able to separate the wheat from the chaff immediately. And that's what today's episode is all about. 

Now I've been doing this long enough to know what a decent deal really does look like before I do any of that, before I have to go and speak to my broker or my architects or anything like that. And I want to try and help you do the same. I can do this in about 60 seconds. Can I figure out exactly what the deal is worth to me in 60 seconds? No, but can I work out whether or not it's going to be worth pursuing in 60 seconds? Absolutely, you bet. And I want to make sure that you can do exactly the same as well. This is a quick filter. It's an instinctive run through in some ways that tells me whether or not I'm going to open the spreadsheet, whether it's even worth running the numbers, okay? 

And if it doesn't pass these six checks or number of these checks, then I'm out. It's as simple as that. I'm going to just forget it and I'm going to keep looking for the next thing. So if you want to spend more time looking at the right deals and less time looking at the wrong deals, today's episode is definitely, definitely for you. So I've got six things that I want to share with you. This is going to be a relatively short and snappy episode, easy to digest. Hopefully you've got a pen or a piece of paper or at least the ability to write some notes on your phone, because I think that you can put all this stuff into practice immediately and make a big impact and save a load of time. 

So the first biggie here, and I bang out about this all the time on the podcast, is pound per square foot. So this is a really key piece of data. When you're analyzing deals, the area average in the pound per square foot is such a great indicative figure that gives you so much insight into a deal. There is a going rate. There's a going rate for properties in an average condition, properties in a great condition and properties in a poor condition. And a little bit like auto trade, like when you're selling a car, there's everything in between. But it's your responsibility as an investor, as an expert in your location to know what that figure is. So where I buy, where I invest, I know what those figures are. And you should absolutely know what that is too. So I can't give you that on the podcast because that's different for every location and every area. But it's really easy to get this information. You can spend some time on

Andy Graham (07:11.345)

Portals like Rightmove and Zoopla, a quicker and more efficient way, in my opinion, is to use something like property data. You can actually punch in postcodes and you can extract sold data on quite specific criteria. You can literally look at, if you want, three beds, semi detached houses within a quarter of a mile of a particular postcode over the last two years and get all of that data. And it will tell you, pound per square foot, what those properties sold for.

With enough data, you can extract some average value information. And that is so incredibly important. And that should be imprinted on the front of your head. Okay. Because you can refer to it so often. Now with that in mind, why is this really, really important? Well, if you know what a pound per square foot average is in your location, then if you look at the deal and you can immediately see the pound per square foot of that asking price is just simply too high, then you can discard it. I'm literally the first thing I'm checking.

It takes 10 seconds to do this. What is the price per square foot of this property? Quick calculation. What is the asking price? What is that relative to the size of the property? So if it's a hundred thousand pounds and it's a thousand square feet, then obviously it's a hundred pound a square foot, isn't it? Okay. If the area average is a hundred pound a square foot, then that sounds about right. But actually if they're trying to sell this property for a hundred pound, 150 pound a square foot and actually the area of average is £100 a square foot, then immediately it's over double where I want to be. It's a non-starter. I'm putting it down. I'm totally forgetting about it. I'm discarding it and I'm just going to move on to the next deal. 

That is about as simple as I can make this. just simply not going to be able to add value to something just by making it a HMO. Yes, commercial valuations are a really great tool to add value, but they are not the first principle when it comes to adding value. The first principle is quite literally increasing the pound per square foot data from X to Y. It is an arbitrage model. You're buying at X, you're doing something to it, and it's going to be worth Y at the end. You need to very clearly see that that is capable. And if you're already buying the property at a price that is too high, that's elevated, it doesn't give you the scope to create that margin yourself. Even if you do some extensions and add a bit of commercial value, it's just not going to be worth your time.

Andy Graham (09:30.814)

So in my opinion, forget it, discard it or absolute most, maybe you'll put a really cheeky offer in, expect it to get rejected, but leave it and pipeline the deal. So if the pound per square foot is just simply too high for the location you're investing in, put the deal to the side. Okay. It's as simple as that. Okay. Now the second piece of advice I want to give you is about the size of the property.

This one's really, simple. I always work off a rough 200 square feet per room that I need in HMO. So if that covers communal spaces, covers bedrooms, it covers circulation space, the whole thing. So for a five bed, you should really be aiming for a minimum of a thousand square feet in a property. Okay. For six tents or a six bed, if you want to create a six bed, it needs to be 1200 square feet, seven bed 1400 square feet. Now these are about the minimum. Okay. This is kind of a minimum threshold that you should be working to or thinking about. Ideally, you would have more, slightly more generous rooms, a bit more circulation space. That's always going to be favorable. And every single square foot that you've got has a value to it that is going to enhance the brick and mortar value of your property. 

Now, if someone sends me a property that's 900 square feet and tells me it's perfect for a six bed conversion and there's no scope to do a loft and there's no scope to kind of really add any space to it, then I'm not even opening that floor. I'm not doing anything. I'm not even going to read the rest of the email because fundamentally I know that it's not possible to turn a 900 square foot property into a six bed house. The maths just does not stack, but I can't tell you how many times I've seen people pouring hours into sketched floor plans, trying to make and find ways of fitting six bedrooms in. 

Now, it's a little bit like Tetris. If you take a floor plan and so long as you've got the windows and the stairs and a reasonable place, you can usually divide it up and create those rooms, but the rooms are going to be too small. The communal space is going to be too squeezed. It's just not going to work. So for me, 200 square feet per room, absolute minimum. If you can create that through some space creation, so through a loft or through a rear extension, that's great. That can be included. But if

Andy Graham (11:52.174)

the property doesn't have that sort of scope or that requirement would just blow the budget, then it's an absolute non-starter. So very quickly, if it's too small for what you need, just put it down. Moving on. Number three, the third thing I want to share with you then is around planning. We all know just how complicated planning is. If your strategy relies on speed, if you want to get into a deal, get it done and get refinanced out and get it cash flowing very quickly, perhaps because you've got investors waiting, perhaps because you're to be on a really expensive bridge, then the deal only works if you move fast. 

And if you need planning of any source, full planning, if you need to convert it to HMO with planning permission, because it's in an Article 4 direction, if you need to convert it to sui generis, that's full planning. If you need to do a full side extension, if you need to do front dormers, there's lots of stuff that needs full planning. If it's in conservation, things like via dormers that would typically be under permitted development, those things can be removed. So you need to very quickly be able to ascertain whether or not what you're looking at needs full planning permission or not. And if it does, and your strategy relies on you moving quickly because you really can't afford to spend too long going through the motions, then put it down. It's an absolute non-starter. 

You'll spend hours and hours pouring into it. And it could well be a good deal, but quite simply, if you're going to burn through loads of cash and spend lots of money on expensive debt that you don't have budgeted, and that's perfectly fine, then just forget it. It'd be better finding something that's much easier, that's going to be straightforward, no planning, dead easy to do. I know that's sometimes easier said than done, but please don't spend all of that time looking at something if fundamentally your strategy relies on speed, because planning, I'm afraid, is not going to help you.

The fourth idea, let's move on. The fourth idea I want to share with you is to be careful and watch out for inflated rents. Now, this is a tricky one and you do need to know your onions. Again, you've got to be that local expert. So you really need to know and have that data imprinted on the back of your mind about what the going rents are. What are the achievable rents in the location that you are investing in? This is a classic one. You're shown a HMO, it's fully lair. The rent looks great on paper and it's a turnkey. Then you look a little bit deeper.

Andy Graham (14:17.148)

and realize that it's only just been refurbished and the tenants only moved in last week. And actually somebody is trying to make a few quid flipping this HMO. Now I've got nothing against that whatsoever, but clearly somebody is going to be trying to get absolute top whack for this selling it as a going concern. Yes, it's fully lair, but the big question here is, is this sustainable? Can those rents be maintained? It's a question that your value is going to ask as well. But most importantly, you want to know whether or not you're buying an asset and an investment that's going to perform at that level for a long time. 

And it is often the case that if a property has just been refurbished and is looking great and all shiny and new, or even sometimes, maybe it's not that, but maybe the listing just, the agent has been putting figures suggestive of what could be achieved. You need to be really careful that those rents have not been as hyperinflated. I see this all the time.

You punch those numbers into your spreadsheet. Of course, the deal looks great. But in reality, does that location have the ability to support that sort of rent? Can it do it long term? Once the shine of a new property wears off, once you've done your refurbishment or once that refurbishment that's been recently done starts to wear off, trust me, it's much, much, much more difficult to fill rooms quickly. And it's much more difficult to maintain those very high rents. Yes, over time, rents generally do tend to inflate.

But new properties, new rooms, new refurbs, it all comes at a premium. And I've seen premiums of well over 20, 25%. That can rub off very, very quickly and have a huge impact on your numbers. So for me, if it's a going concern and the rents look inflated and you think, well, that sounds a bit toppy, I would just be walking away. Or again, like the first example, at the very most, I'd be putting a really cheeky offer in, expecting it to get declined.

Pipeline again waiting for them to come back to me when they realize that actually they are trying to achieve a little bit too much on that particular deal. 

Okay. Number five then, if you need a mortgage, if you're relying on buying a property with a high street mortgage, perhaps because you're doing something that doesn't need a huge refurbishment, that's the plan. You haven't got a huge budget. You want something pretty straightforward. You can go straight to a term finance product. There's lots of examples out there. You're not going to be taking the roof off or doing huge

Andy Graham (16:43.26)

structural conversion works. I've done loads of these projects myself. I really, really like them. Dead easy. But if that is the plan, if that's the approach you need to take because your circumstances dictate that, then looking at a property that's going to an auction simply isn't going to suit. I've seen this a lot. The problem is when properties go to auction, yes, they look good. Yes, the price tags look good or can do at least, but it can be very difficult to get the finance you need in place very, very quickly. I have had a number of conversations on how to advice people right before kinda the hammer was gonna go down. It’s going to be difficult to get the finance you need in place for this. You are going to be looking at having to bridge this. I’ve got nothing against bridging but you’ve got to factor those costs in. It’s very expensive. And bridging tends to workout at about a percent every single month and then you’ve got to get off that bridge on to your term finance and there are additional costs in all of that as well. And additional legal expenses and things like that so 

Andy Graham (17:40.36)

Look, if you need a mortgage, if you're trying to buy something straightforward, please don't go and look at auction properties. You have to be really, really on it. You need to get your legal packs reviewed quickly. You need to get your whole numbers, your whole kind of deal analysis and prep done. That means if you need floor plan optimisations, which might need measured surveys, all of that takes time. It's got to go to the architects. There's so much stuff. But if you need a mortgage, a standard mortgage, banks cannot work quickly enough to get a deal completed in four weeks. 

Well, certainly in my experience, they can't. So you would be looking at a bridge lender, which really does change the game. So if it needs a mortgage or you need to buy with a mortgage, please don't look at things that are going to auction. I know it can be attractive, but it's actually a big, big distraction. The sixth and final idea that I want to share with you that'll help you separate the wheat from the chaff, put down the bad deals, just focused on the good ones is about refurbishment costs. This is a difficult one. 

As you get more experience in this game as you do more and more projects, it does get easier to make assumptions and more accurate assumptions about what projects are going to cost, what refurb is going to cost, how long they're going to take, what sort of problems you're likely to encounter and all of that stuff. If you're at the earlier stages of your journey, it's going to be naturally much more difficult. So if you feel like that, then don't worry at all. But it is really important that you understand the fundamentals in terms of conversion costs and what could be involved at a fairly high level.

So if, for example, a property is a full back to brick conversion, and let's just say that that property is around thousand square feet, there's no way, there's not a cat in hell's chance that you're going to get it done for 50,000 pounds. That would be 50 pound a square foot for a full back to brick conversion. It's just fundamentally impossible in the current climate. The labor that would be involved, the volume of materials for space as big as thousand square feet. It's just simply not possible. I don't care who you build with.

Probably more worrying if you've got a builder that could do 50 grand, but that's 50 pound square foot to do a project like that. And it's 2025. You would be dreaming it's not going to happen. And you will end up actually in hell if you went ahead with a project like that and then realize further down the line that actually it's going to cost far more. It's more likely, much more likely to be in the region of somewhere between 100 and 150 pound a square foot. actually

Andy Graham (20:00.308)

I wouldn't be surprised to see prices in the region of £200 a square foot, depending on where you are. There can be quite a broad spectrum of costs on these sorts of projects. And of course, big part of this really depends on the spec. If you're going for a really high end spec, then it's going to cost a lot more. But nevertheless, we do need to be more honest about what refurbs are likely to cost us. We are naturally, as investors, often a bit optimistic about what we can do with refurb budgets. I think we've all watched a bit too much Homes Under the Hammer doing full refurbs with 6000 quid. I mean, your furniture is going to cost 6000 quid in a HMO. 

So please, please, please just be really honest with yourself about the likely cost of a refurbishment from the outset, because you will at some point further down the line find that the reality is very, different.

At that point, you may have spent lots of money going through conveyancing, getting drawings by your architects done. Maybe you've employed a planning consultant, it's going through planning. Maybe you've then started the tender process and had loads of conversations with builders. You could have spent weeks and months doing this to then find that you were a hundred percent out on your refurb budget. 

Please, please, please don't let yourself get into that situation because that will be really frustrating and it'll be really demoralizing. And I understand that it's difficult, but reach out for advice, ask in the community, join the HMO roadmap, learn more about this sort of stuff because it will help you navigate these sorts of big, big challenges. And honestly, these are the sorts of things that just prevent so many people from getting their businesses off the ground. So there we go, my 60 second check. Look, it's a quick gut level filter, very high level. It's barely even what I would call a desktop or back of the fact packet type of check.

But this does tell me very quickly whether something's worth a second look or not, whether it's going straight in the bin. So let's just recap on these very, very quickly. The first one was about the pound per square foot. If the pound per square foot already looks too high, then it's probably not even worth pursuing at all. Just put it in the bin or the most offer, cheeky offer, expect it to get rejected. Just put it on your pipeline and maybe they'll come back to you in the future. But this for me.

Andy Graham (22:12.532)

is an incredibly important one. So make sure that you do understand that pound per square foot data about the area that you are investing in. Number two, is the property, is the footprint big enough for what you actually need? If you want to do a five bed, you need to have an achievable 1000 square feet minimum, six bed, 1200 square feet, seven bed, 1400 square feet achievable. If that is fundamentally impossible, don't bother. It doesn't matter how creative you can be drawing the floor plan up. It simply is not going to work. 

Number three, does it need full planning permission and do you need to move fast? Look, if speed is a key part of what you're doing because of your circumstances, because of the type of lending and costs involved, don't go anywhere near planning. Trust me, as simple as it often sounds, it just isn't. There are so many reasons why so many planning applications get delayed. Right down to planning officers, just going on holiday for two or three weeks and your application is just put on hold while all of that happens. So there we go. 

Number four, could the rents be inflated? Could they be unsustainable? You need to make sure that you are checking all this information. You need to have that raw data to hand. You need to understand what is achievable. And if those rents look inflated, if it doesn't look sustainable, if that market just isn't there in that location and you've got to be honest about it, don't bother.

If at the very most you put a cheeky offer in, leave it with them, you'll probably get rejected and just pipeline it. Most things do work at the right price, but it absolutely has to be at the right price. Number five, do you need specialist finance or are you proposing to buy it with a normal mortgage? If you're proposing to buy it with a standard mortgage, then

You can't afford to look at things that are going to auction because you simply won't have enough time to actually complete on that. You go to an auction, the hammer comes down, you exchange there and then you've got about four weeks, typically four or five weeks to complete on that deal. If you need a standard mortgage through fairly typical high street bank or HMO lender, you simply won't have enough time to get that sort of finance in place. If you see something at an auction, you need to be prepared to either privately finance it or go to some sort of bridge product. It's a type of finance.

Andy Graham (24:25.638)

that your lender can move very quickly on. So it very much depends on your strategy, your budget, how you're planning to approach the deal. But don't forget the auctions. You have to move exceptionally quick and very few lenders can actually move quickly. And finally, number six, make sure that you're being honest about the refurb cost. Don't be overly optimistic. Don't find out later down the line that it's going to cost you two or three times the amount to do that refurb. Just put the deal in the bin or again, at most put an offer in, leave it with them, pipeline it, and if they don't sell it, maybe they'll come back to you. 

If a deal fails on any one of these, it's probably going in the bin for me, but if it's failing on a number of these, then it should definitely go in the bin, in my opinion. One in a hundred deals where there are these sorts of issues might somehow work in some way, but it's just simply not worth your time. You'd be far better putting it down.

Keep focused on looking for the right thing. And they are out there. The right things are out there. And sometimes we just need to adjust our expectations a little bit or be flexible with locations or some element of the deal. But be really honest about this stuff, because what I don't want you guys to be doing is spending hours and hours and weeks and weeks and even months and months going round and round chasing your tail. It can be really easy to do so much easier than actually we often think. It's about to sound brutal, but I promise you it will save you tons of time and loads of heartache. 

And for some of you guys listening today, it probably will be the difference of actually investing in HMOs or not, because a lot of people do actually throw the towel in because they look at so many deals, spend so much time and over a three, six, nine, 12 month period, get so tired of doing it. So there we go, guys. That is about it for today's episode. I hope that that has helped you. I hope that that helps you In some way streamline the process of stacking your deals. It's a really important part of the process. You need to be able to move fast. You've to be agile in this game. 

You need to be able to jump on deals quickly, but you also need to be able to say no really, really quickly. That is as important as anything else. If you need some help with any of this, then head on over to the HMO community as your first port of call. So great place to find the guidance and support that you need. We've got over 10,000 members now investing in HMOs all over the country. In fact, from all over the world. It's a great place to ask the sorts of

Andy Graham (26:43.499)

questions that we've been talking about in today's episode. Now, of course, if you are serious about buying a HMO, scaling your business up, building your empire, then you need to check out theHMOroadmap.co.uk. We've got over 70 lessons there walking you through the basics, step by step, really easy to digest. We've got dozens and dozens of expert master classes on all sorts of subjects. We've got nearly 80 case studies from community members, really incredible deals of all sorts of variety done all over the country from lots of different people, giving you really unbiased opinion and breadth of experience that you can learn from really fantastic tools, lots of videos, loads of example footprints and floor plans in there, just tons of incredible learning material that I promise will help you with all of this stuff. 

And of course we've got a whole lot more, including the deal stack. And by the way, the deal stacker inside the HMO roadmap. We've got AI working in the background. So for example, if you punch a postcode in for your deal, something that you're looking at, the fairies in the background will magically extract average pound per square foot data for you. So very quickly, no, instantly you will see what you are paying on a pound per square foot basis and what that is compared to the area average. It'll tell you whether you're above, below, or kind of about right. It's an incredible tool and helps you do this exact exercise, but just gives you that additional layer of confidence when you're going through that more detailed level of appraisal. That's it today, guys. Thank you again for tuning in. And of course, 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.