The third episode of The Eviction 2022 aired on my YouTube channel recently. Contestants are playing to win £20,000 cash to kickstart their property journey! There will be an episode weekly until the end of the year. This week, the teams were tasked with finding a property that could be profitably turned into an HMO (House in multiple occupation).
One way to make sure an HMO is a profitable endeavour is to use the buy, refurbish, refinance, rent (BRRR) strategy. This means finding a run down property that you can add value to. Once you have added value to the property, you can refinance it at the new price. This allows you to pull most or all of your money out of the deal, which can be used to buy another property. These are the type of deals the teams found. They then presented the deals they found in front of an audience at one of my training events.
If you want to find deals like the teams on The Eviction did, you need to take massive action. In this article, I will give you three tips for finding potential BRRR HMO deals.
1. Look for multiple reception rooms
If you find a property with multiple reception rooms, there is potential for turning one or more of those rooms into a bedroom. There are some regulations to contend with regarding room size, but providing everything checks out this is a great way to increase cash flow. Often you will be able to get a better price on the property than if the reception rooms were listed as bedrooms.
Many times, these properties will be overlooked by other investors looking to buy a property for HMO purposes. Some investors will limit their search to properties with the number of bedrooms they want and will never even look at other properties. This creates opportunity for you.
2. Avoid Article 4 areas
In an Article 4 area, the council requires you to get “change of use” planning permission to use a property as an HMO. This is very hard to get because normally the reason for the Article 4 designation is that the council feels there are too many HMOs in the area and they feel this has, or could, impact the local community in a negative way.
Therefore, it is important to check if an Article 4 designation is in place before buying property in a specific area. You can find this information on the local council’s website.
3. Seek out places about to become Article 4 areas
If an Article 4 designation is in place, I would advise staying clear (unless you are an expert in this area of planning law). If, on the other hand, there isn’t currently a designation in place but the council has announced plans to issue one, this is a great time to buy.
As long as you can get the property up and running as an HMO before the deadline, the council will give you ‘grandfather rights’ to continue using it as an HMO. This means that there will likely be no new competition once the designation is in place!