Watch: How to build a profitable HMO management business

Speaker (00:06.427)

Thanks for coming along to see us today. My name is Neil Bullock and I’m the founder of the HMO Network, which is a national network of HMO specialists, letting agents and property managers. The network’s about two years old now and I think collectively between the whole network about 31 agents. We manage somewhere in region of 13,000 rooms now across the country and a guesstimate about 72 million pounds of rent is being collected. So we’re quite a sizeable organisation with a focus on

The reason the network was born was to one, help letting agents and specialist property managers in the HMO sector to grow their business, but also to give landlords a space where you could come to look for a quality mark of a group of agents who hold themselves to a higher standard. We’ve got a mix of people on the panel today. should say as well, I also have my own estate agency, a letting agency in Cheltenham.

in Essex and we do a lot of HMO management there as well as traditional sales and nettings. But yeah, so let’s have a quick intro from the panel if we can. You can tell us who you are, where you operate and how many rooms you manage and how many are the tenants. So I’m Alex Patterson Appleton. We have an agency solely doing HMOs called Relo Rooms and we’re based in Hereford but we manage rooms in Hereford, Worcester and Gloucester and overall about 200 rooms.

Hi everyone, I’m Lucy Lee. I set up LEA Property Solutions 21 years ago, so I am definitely not sane. We operate in Ipswich in Suffolk and my team of three manage the day-to-day running of the business and I now do concentrate on HMO conversion, property management and HMO consultancy.

Hi, I’m Sarah Evans and I have Cardia Lettings. I’m probably the baby of the group. So my business has only been going four years, although I’ve been in property 20 years and I specialize in HMOs. I also do white label for other HMO agencies as well. And probably now looking after about 120 rooms. I’m Russ Dybul. We’ve got a group of companies that provide end to end from sourcing, interior design and furnishing, and then the management at the end.

Speaker (02:29.101)

called Rent A Room, we work in the West Midlands, so Coventry, Hinkley, Tamworth, Rugby, that kind of area, and we currently manage just under 600 rooms. Fantastic. So…

Yeah, so the theme of our talk today is about how you can get rid of the chaos and keep your sanity, as has already been said. But before we talk about that, let’s talk about what did chaos look like for you in the early days of your HMO management journey. Lucy, let’s come to you first. Neil, I think I was the meaning of the word chaos at the start because I had no systems in place.

stumbled across HMO completely by accident. I was a 2004 university graduate, could not find anywhere to live, that just offered me a home with some of my own age, clean, tidy, matching furniture. That was a criteria I’d done the student days. I couldn’t find anywhere, so I bought my own two-bedroom terraced house to cover the mortgage, got someone in to rent the second bedroom and the reception room. Then as I moved out with my now husband, I then unwittingly became an HMO landlord.

And I managed that house how I wanted it to be managed as an owner. But obviously that was very organic. So I had a very a lot of tough lessons in the early days. And yeah, my all my experience has been from hands on. But you have to have processes in place to make something like this successful. Sarah, I’m sure you’ve got some chaotic stories for us. Excel spreadsheets is kind of one of them. Yeah, that was chaotic China.

note all your gas safety certificate due dates in Outlook calendars and missing them and yeah, complete chaos and a disaster. then yes, systemize and process and it all wins itself now, she says. Russ, obviously you own some of your own properties and have a letting agency as well. So talk to us about that. I’m conscious we’ll have some landlords and sort of individual landlords, portfolio landlords and letting agents in the room.

Speaker (04:37.005)

So talk to us from a of a landlord’s point of view on that. Yeah, so we have a direct financial interest in about a third of the rooms that we manage. So just under 200, either on lease, rent to rent, or we own and develop some quite large 18 beds, Lucy and I. So I’ve got the landlord hat, but we are one of our single biggest customer of our own agent. So our team manages our properties just the same as anybody else, which gives you a really good insight into the

experience of a landlord and what needs improving, changing, tweaking. And from the beginning, obviously we were very involved. Lucy would go out and do the view ins that we’ve done with the gardening and everything. We’ve done the WhatsApp groups with tenants and all the kind of things that in the early days you think are the best thing and the reason why people would want to rent from you and have you manage their properties. And you realise that as you grow,

Probably the things that seem the best idea at the beginning at scale are the things that are going to cause you the most pain because to do those things at scale is very difficult or very expensive because you need a lot of people to run them. So we’ll obviously come on to systems later and team and staff and whatever. Fantastic. Alex, am I right? You’re in a similar position. Yeah, very similar to us. We probably own half the properties we manage between our family and that’s my two sons and husband and I.

And we actually started because we’d bought some properties and needed to manage them ourselves. But my son had the most diabolical letting experience in Oxford. And he said, we’re going to do this properly. But actually, he’s very systems driven. And so from the very start, we did have quite a lot of systemisation in place. But as we grew it then became more chaotic. So we kind of start off well and then had to organise ourselves a little bit later.

Yeah, I guess that’s probably a challenge for most people when they’re managing properties is that, you managing one might be okay, but as you want to scale it, then you’ve got to start putting some of these systems in place to take away some of that chaos. So what’s one simple system or process that any self-managing landlord could maybe implement tomorrow that

Speaker (06:56.574)

just take a little piece of chaos away from them. Or not having a WhatsApp group for a staff. When you asked me mention that, it took me back to the horrible days of just, you know, getting a message when you’re on holiday and you’re trying to relax on a beach somewhere and someone’s fallen down the stairs. You just don’t need to know about things like that. You know, then comes coho, everything’s through a messaging central system. All staff can get access to it so you’re not passing a phone around. Yeah, that took me back some there, Ross.

I think one of the other things as well is it’s about expectation management. So I used to work in an IT company and we had a service desk that would service tens of thousands of people around the world. things had, know, priority one would be done within X number of hours and so on. And what we realized just at the point where one of our team was about to have a nervous breakdown managing WhatsApp groups was that WhatsApp is, we’re not just bagging on WhatsApp, we’ll obviously go on to knock other systems as well later.

It creates, it’s very instantaneous. If somebody sends you a WhatsApp, you’re feeling that you should have replied fairly quickly. It’s an instant messaging, it’s the clues in the name. Whereas if somebody sends you an email, you probably would reasonably expect to reply within 24 to 48 hours. And we found that one of the things that really helped by removing WhatsApp was a slowdown in the expectation about non-urgent things being dealt with.

straight away. You know, there are some things you need to know straight away and there are probably some things that you need to jump in the car and deal with immediately. The vast majority of things that tenants want fixed are not things that need that level of response. So by getting them to raise a ticket on the system or by emailing, it sets a kind of a reasonable expectation. You can put a reply that says, thank you for your issue. You know, this will normally be dealt with within 48 hours. If it’s an emergency, please do the following. And for us, that’s

phone a phone number that’s monitored out of hours and we’ve got a great company that do that for us. But it’s that expectation management, I would say that, and be clear with people how long things are going to take to fix. And on top of that as well, you tend to find that once you take that instant gratification away from them, they actually do things themselves. So if they’ve actually got to log on to a system or send an email, they’ll actually go, I’ll try and see if I can.

Speaker (09:19.006)

figure this out myself and change a light bulb or whatever it is. So I actually found that I got less things reported to me when I removed the WhatsApp groups. Interestingly, we still use them and partly because I find it very efficient, but we do use business WhatsApp and it has greeting responses. So you can say, you know, if somebody hasn’t been in touch with you, it’ll automatically send them a message saying, you know, we won’t respond immediately.

If it’s an emergency, call this number. And same with out of hours. Come six o’clock or seven o’clock in the evening, goes on to, know, reloads now closed. If it’s an emergency, do this. Otherwise, wait till the next business day. And it’s, as Russ says, totally about managing expectations. And if somebody says, oh, you know, I don’t know, the loo’s leaking on WhatsApp group, we just say, stick it on Arthur. And we will not respond to certain things, even though it’s instant messaging. We’ve educated them.

And that’s made a massive difference. So we do still use WhatsApp and it has a purpose, but you have to tell them how to, how you want to be communicated with. you have that as a conversation with each person or do you have a WhatsApp group? We have a WhatsApp group for each house and sometimes they’ll message individually. And the only annoying thing with the auto response is it doesn’t work on a group. So it won’t go to the house, but we…

when you check them in and when you meet people and we’re always banging the drum that out of hours you’ve got to call this number. And so you won’t get a response at seven o’clock or eight o’clock, nine o’clock, midnight some of them send messages. I’m not going to reply. I one of you mentioned the word education of tenants. I think that’s a really important thing of setting expectations. with the maintenance because, you know,

I just say to them, look, if you tell me in passing or if you tell me on WhatsApp, by the time I get to my desk, there’ll be 50 million WhatsApp messages and yours will have fallen off my screen. And I’ll forget by the time I get back to my desk. So put it on the reporting system and then we cannot forget until it’s ticked off having been done. And they kind of get that now. Interesting. We had

Speaker (11:35.112)

conversation in our own WhatsApp groups. We’re not dead against WhatsApp. But somebody suggested, and this might be something if you are a self-managing landlord that you could implement, sometimes it’s about making things accessible for tenants as well. So where we educate them, they should be using our reporting systems. Sometimes they still want to phone the office, whereas some of our agents have now got QR codes displayed around the property, which then go through to their…

maintenance reporting system. And even if you are self-managing a property, you could always have the QR code displayed in the property that then goes through to a type form or one of these free form builders that you can build on the internet now. So I think no matter what scale you’re at, there are little systems you can put in place to start.

streamlining that communication and not being at the beck and call of everybody. You have to be robust with the tenants and say, you know, we are not going to do it your way. You’ve got to go in our direction because otherwise it won’t get done. Simple as that. think following on from what Suzanne was saying earlier, the admin side of that is really important going forward to be able to evidence that you are dealing with things that when they’ve contacted you, when you’ve contacted them back.

And it’s really not as easy to do in a WhatsApp chat. I mean, you’ll have your own personal WhatsApp chats. Trying to find something someone said six weeks ago is nigh on impossible. So when you’re using a system like that, like the job form or an actual CRM system, you’ve got that access to be able to monitor, pull data off, record what’s happening so that you can keep on top of it. have to say, the one beauty of WhatsApp though is when a tenant says, you haven’t told us, you can look at the message, look at who’s read it and what day and time. And when you send them that, they go,

and that just solves it instantly. It does that on Coho as well. It has a messaging system on Coho and you can see who’s actually read it and when they’ve read it. So that’s handy. So let’s go on to the next question. So what I’d like to know is what do you think the first piece of software or tech you’d be recommending to a landlord managing say one to five HMOs and then how about someone with like 20 plus rooms or 20 HMOs, something like that.

Speaker (13:49.513)

Has anybody got any ideas on that? For me, it would be from the finance perspective and something like Xero or Sage or some finance monitoring system, because there’s nothing worse than not remembering to include something you’ve bought three weeks ago on your charges or making sure that rents have come in. As I say, white labeling for some other agencies and they’ll message me in like the middle of the month and say, oh, I haven’t received the rent from this tenant. I’m like, how have you just worked that out? It’s like the 15th of the month, it June the first.

Whereas, you know, when you’ve got a system in place like that, you can see straight away exactly what’s going on with the finances, because it is a business at end of the day. Absolutely. I think especially with the volume of rooms and the way rents have risen in recent times, the actual volume of money you’re transacting is rather large, it? So you need to be able to have systems in place to track that. Having your credit card that goes straight, you know, connects with your zeros so that you can then just put it in the right column for what house.

It’s all about HMO management is all about organization. If you’re organized, you’re going to nail it. I think from the very start using some form of property management software is the way to go. know, spreadsheets in the early days that they seem fine, but then you quickly get in the right muddle. And actually, as Lucy was saying, integrating with your

accounts package of whatever kind. Some of them have them built in. The very first system we used was called Landlord Vision and it did everything and it was fine for a bit, but then we had to change to something more comprehensive. But that’s quite good for, you know, just a small landlord, self-managing. So just depends. But some form of software, I think is the key.

from the beginning. think when you’re onboarding a tenant, there’s so many legal hoops that you’re jumping through already. You’ve got to serve them for how to rent, guide, the data protection, and your CRM system is doing this automatically. So in the old days, it’s they need an email, have I attached everything, just checking. Now you know, you give them the coho, log in, they log on to the app. You know that’s all being sent to them. I think, so yeah, I would say even from the very early days, that’s the way, good way to start. It seems like…

Speaker (16:01.328)

money you think you don’t want to spend, but actually it’s money well spent. though, you know, the monthly cost is totally saves you time. makes you just, everything’s more efficient and, recordable. And that’s the key. And, know, when somebody says, you know, like you’re saying, what was this thing five weeks ago or whatever, and you can’t remember, you just look it up in your accounts package and it’s all sorted. Yeah. I think it’s also about recognising

You can move through systems, can’t you? So you can start with something small that suits your business as it is. Exactly. You don’t have to stick with the same one. And I think we looked at lots of different packages and it’s very clear that there are certain software packages that are very geared towards very much larger businesses. I mean, you know, we’ve got 200 rooms. That’s quite a lot. But there are certain ones that, you know, plenty of people use, but they are too comprehensive and they can be baffling.

And you have to analyze what your requirement is, not necessarily, Fred’s using this and Joe’s using this or whatever. You need to look at what suits you best, Fantastic. Lucy, you mentioned tenant onboarding. So.

I’m going to ask you this question because you’ve sort of volunteered yourself. So what’s your process when on boarding a new tenant and how do you avoid common issues later? We’ve all seen it where a tenant moves in and then they’re straight on the phone because they don’t know where the toilet brush is or whatever the case may be. It is literally communication, communication, communication, communication from the very start. If they know that you’re giving them all this information and they’ve got to do it to progress any further, then that’s going to be the way it always is. So Coho is a good indicator of that.

because you ask them to join the co- the Coho app and join Coho that way. And, you know, it does it. just the demands are there. It tells you what’s happening exactly. Tenants on boarded, tenants manage a sent application form, tenants read the documents, tenants filled out. It’s all there. And it’s just really, really easy. But because, like I said, there’s so many legal things you need to do and you need to get those out to the tenant. You know, just simple things like, you know, you need to tell them that if they’re going to pay this holding fee.

Speaker (18:13.064)

and they suddenly decide, oh, I don’t want that room anymore. You are keeping that holding fee, but you’ve got to have that document in place there that tells them that so they can’t come back and say, well, that’s not fair. And having COHO, the documents all there, they’re all ready to go. So it’s just literally a click of a button. Yeah, that’s the way we do it. OK. Anybody else? So it’s documentation and communication, really, isn’t it? It is about spending time as well. So this is a process we’ve just looked at. We’ve been doing this for a long time.

And the other day we had this discussion, why are we getting our lettings team to do the move-ins when we’ve got property managers who actually manage the property and really know all the foibles about where things are and what everything actually is the beginning of the bigger business. It’s the beginning of a property management process rather than the end of a sales process. The other thing as well is to know your tenants. So, you know, I think, know, COHO is particularly good and I think very geared at

young professionals, adult, know, everything is now app based. We have probably a hundred tenants who are not particularly tech savvy. We have a large portfolio of people on housing benefit. They don’t have smartphones and they still need that personal touch of somebody checking them in and going through the rules and then documenting that is the bit we have to then balance up. So yeah, it’s a of a challenge. Obviously, Universal Credit requiring a smartphone does help because that’s brought a lot of that.

your old sort of typical bed sit, HMOs into that realm. They have to have a smartphone to do that, but I still think it’s a personal touch. They still need a person to go and check people in and talk to them and explain and what happens. Yeah. is your kitchen space. I can clean with Russ because there are a lot of people who say, well, I just tell them what the key safe code is and they go in and blah, blah, blah. We do do telephone check-ins, but I would never…

just leave somebody to go and open a key safe and just let themselves in because they then don’t settle at all well and everything is personal touch and we are, unless our property team can’t be available, it’s always the property manager who will check them in because they’re then the first port of call for anything once they’re living in the house.

Speaker (20:34.127)

So although they’ve seen the letting person through the application and the viewing and all that kind of stuff, you then need to hand them over and the check-in is actually the best time to do that and starts the communication with the right person thereafter. definitely. think time invested at the start, sometimes the property manager is like, I’m so busy, I haven’t got time to do this, but actually spend longer with your tenant when you’re moving the meeting.

It’s going to buy you back time. It’s really important to actually our property manager was new a couple of years ago and to start with she’s sort of said, oh, you know, this is a bit of a waste of time. But actually now she spends a long time because she realises that investing her time at the start saves her time later. Yeah, yeah, definitely. I think it’s an interesting question for those in the room that are growing and perhaps thinking maybe I’ll take on a property manager, somebody to help me. And then those that are.

making the decision about do I then manage for other people? I think that’s a huge difference once you start managing for other people. And one of the things I would suggest you think about is are you going to have one property manager that’s multi-skilled, that does everything about that property, or are you going to have a lettings team, a management team, rent collectors? So we’ve got a team of about 15 now, maintenance, and both models are good, but you have a property manager that knows a lot about what’s going on with the property.

isn’t reconciling the rents for those tenants, they’re just giving that information. So if you’re in that growth stage of, and I think this comes back to WhatsApp and everything is, WhatsApp’s great if there’s one person checking, responding it, managing that property. Once you then have an accounts person, a lettings person, a maintenance person, everything changes about how your systems work because tenants then need to interact with different people and that the systems then…

either stand up or fail on does it allow multiple conversations because the tenant just sees rent a room. They don’t know they’ve got to speak to Julie about arrears and Laura about maintenance and Becky about what’s happening. Whereas if you have a property manager who deals with everything and you have probably a smaller number of rooms but you do everything but you need a person who’s pretty capable at doing everything. So if you’re in that process of am I about to hire someone? Am I going to start managing for other people? I would say

Speaker (22:53.776)

think very carefully, because really what you set up at the beginning, that’s the channel you’re on for a long time. So Thorpe, stay with you Russ, for people that are thinking of scaling up, what do you think in your business was like the single biggest operational change when you started actually scaling up? Was it system or was it hiring a VA or was it team members? What do you think? So we did a lot between us, two of us.

And then we bought on our virtual assistant at the time, Julie, who’s here today, still with us, seven and a half years later. Our team meeting was a whiteboard with four names on it. That was our four tenants. And we went through what they had for breakfast, everything. That’s how much we knew about them. Now, know, team meetings are very different. Delegating quickly. And this is something that we’ve worked on with our business coach, hiring probably one person ahead of what we think we need.

because then we’ve got the headspace to support them to plan what they should be doing. We’re not stuck in doing the do it, doing our job and then trying to help somebody new come in. But that requires an investment. So if you’re on your own and bringing in a property manager to help you, hiring one person ahead is a very expensive option. If you’re looking to scale, like we are to probably a thousand rooms by the end of next year.

then you make those decisions, you borrow money to invest in a bit, whatever. So again, one of the things I would say is decide where you want to be. Because I remember when we had 100 rooms, saying a couple more people and we’ll be, that’ll be everybody we need. And here we are now with a team of 16 and we’re still hiring. Property is quite a people, for all the systems and all the talk about AI and all of that stuff, property is a people business. To do it properly, it’s a people business.

you want to be because you know not everybody wants to have thousand rooms or whatever we’ve got more than i’d like at the moment because i pick up a lot of the jobs but there was a time when my son who was instrumental in setting everything up said you know we’re going to franchise and we’re going to do this we’re going to be nationwide and i was thinking my god because i’ll pick up all the pieces but his focus has changed and so we’ve sort of settled at a middle-sized business

Speaker (25:16.673)

and we’re ticking along quite nicely and we probably may not grow much more because it suits us as it is. So it depends what your ambition is really. If you want to conquer the world, fantastic, rather you than me. But if you just want to manage your portfolio, maybe somebody, a few others in the town you’re in or whatever, you can keep it small. You don’t have to grow. That’s it. Yeah. Yeah. So I was just going to say on that.

I’m very much in that that mind frame. So since having children, I’ve coasted, you like, I haven’t grown on purpose, because actually quality of life for me now is really, really important. getting a salary from my business where a team of three run right now, that’s more important to me to have a better quality of life with my children than it is to actually grow and, like you say, conquer the world. Our company name is Renteroo National Limited, and we had exactly that attitude.

And a few years ago, we decided we’re not going any further than 20 miles from our office for that reason. And it’s not control in a negative sense, in that having that team, having that accountability, camaraderie. we’re to react in a timely manner because, you know, if you’ve got an hour’s drive or an hour and a half’s drive to wherever you need to deal with the calamity, it’s a major headache.

And if you don’t always have people on the ground, even if you’ve got a big business, you might have a good office team, but they’re not necessarily in the locations you’re managing. And that can be a right pain. So it just depends what you want to do really. Interestingly, Coventry Council’s licensing now, one of the questions is where is your property manager geographically located versus the property? Same in Oxford, yeah. I haven’t caught up on Ipswich yet. So we have virtual, we have VAs in the Philippines, but they want to see someone.

For exactly that reason, I suspect that they’re getting a lot of people, or we’ll just manage it with a VA, stand back, who goes in the middle of the night when there is a serious problem. Yeah. And we learned very quickly that, you know, even your supposedly reliable tradespeople, if they’ve had a drink on a Sunday night, they’re not going to go and fix the flood. So occasionally you do have to go and turn the stop tap off or whatever it might be. However, against the grain, it might be for your systems in your business.

Speaker (27:29.891)

sometimes you do get that down and if it’s two hours drive, an hour’s drive, it’s a hassle. It’s fascinating going in though, isn’t it? So we’re at the stage now where we don’t get involved in the day-to-day management, we’re managing the business. But when we do go into a property, I come back with a list of things that we’re going to do differently. I think you have to be still at that level. I think if you’re looking for a managing agent and the MD isn’t in the office, isn’t occasionally going out, a big corporate chain…

I think it changes things again. We do spot checks every now and then because although you you might have a really good property management team, they do become complacent and you have to keep them on their toes and every now and then you know some things are double booked or whatever it might be and one of us has to step in. It’s such an eye-opener and it’s really refreshing for your business because you get complacent as well.

thinking your team is marvelous and doing all this, that and the other, but they do let you down occasionally, sadly. And even for some private landlords, looking after other landlords’ properties, they might have a VA or they might be doing it themselves. And sometimes I’ll come in to take over the management and find that there’s things that haven’t been done or haven’t been caught up with. And they’re like, I didn’t realize that. And they didn’t know. it’s trying to keep on top of that as well and still keep your fingers in the pie, so to speak.

Sarah, what could you do manage for yourself or other agents or private landlords? What point do you think self-management becomes unsustainable for a landlord? I’d probably say when you get to of five or six HMOs around the five, six bedroom mark is when you start to get to a point where it becomes… Takes over your Yeah, it takes over your life, yeah. It’s not full-time job, but it’s definitely more than part-time. Yeah, yeah. I think one thing I’ve thought, I mean, you know, the point it becomes unsustainable is if you haven’t got the time for

or also you haven’t got the skills for it. And Lucy, we were having this conversation the other day that HMO management isn’t all about the property management, it’s actually a people management business. property is very rarely causing a problem. Well, had a very successful, have a very successful landlady who was self-managing, had good systems, but she just got fed up of dealing with tenants.

Speaker (29:48.995)

And she wanted to go out to work and have a job where she didn’t have to worry. She could go home at the end of the day, not think about anything, knowing that we’re picking up the pieces if the tenants are causing problems. And for her, it’s just, you know, a quality of life. It’s a bit like any business, I guess. If you don’t have the skills to do something, you either require those skills and get somebody to do it for you or you outsource them to an agent. If you’re not good at your accounts, you get an accountant.

But know, don’t get me wrong, there will be some landlords that want to scout it themselves. But of course, there’s nothing stopping them getting a VA or getting a member of staff themselves, there? So I think it depends on tenant type as well. So for example, if we had we develop now more studio type rooms, we get very little arrears, very little tenant issues, very little interpersonal issues because they’ve got their own space. We’ve got a

Probably sort of the middle, you most of our rents are 550 to 650, generally reasonably okay. Most of our issues are in the 400 to 500 bracket, shared facilities, older properties. And then our care, if you like, our TLC is given predominantly to the 50 odd rooms where we’ve got quite older tenants, know, people who’ve been in those rooms 30 or 40 years, and they’re on housing benefit and life.

is a bit complicated, modern life is a bit complicated, because we spend a lot of time, so I think a lot of the question about how much time and when can you relax is, it largely depends who you’re managing. The time I probably would say I started to relax of an evening, although still do a lot of work, but relax, is when we got a really good out of hours phone service who can take, not only take messages,

that actually deal with a lot of the problems. So they’ll get on a video call. So before that was coming to me and somebody would just ring through and go, we’ve had this phone call, the tap’s dripping. That’s still my problem. That’s still, I can’t have a drink, I can’t go too far. Because ultimately I was still at that point, the out of hours. At that point when you say, unless the house is on fire, these guys will get on a video call, tell the turn that’s just turned the stop tap off, call two or three out of hours people. But worst case.

Speaker (32:09.964)

there’s no water until the morning. That I would say if you’re a self-managing landlord and you want to scale and not give your properties to a managing agent, which of course we would all recommend, but a really good out of hours process, whether that’s a local person or a system like that, that probably was the game changer for me. I do think though, if you are not a people person, you probably shouldn’t be in a letting business.

especially HMOs, because it’s all communication and talking to people. And if you just don’t want to do that, do something completely different. And also choose your tenant type, because, you know, Russ has got a complete mix. We only do professionals in most of our houses, but we have a completely separate portfolio that’s supported living. But we don’t do any of the tenant management there. There’s a housing association who does all that.

So it just depends, know, if you want to have to put the extra time in with the TLC for those who are slightly older, less techie, whatever, then great. Or if you want to sort of slightly more hassle free, you know, we go for professional tenants only and our rents are quite high, so it’s self-selecting. And that generally means we don’t get too much hassle. So I think choose your tenant type.

And that helps enormously. Thanks, yeah. Very good. Sarah, what do you think is the biggest management mistake you’ve made? And if you were starting out all over again, what would you do differently? Excel spreadsheets. think you’ll have to come back to that. That was probably the biggest mistake I made, was thinking that, yeah, you could do everything with spreadsheets and tabs and a calendar. It soon fell apart and…

Yeah, because you know, you think you’ve got it all right. It’s coming up to the certificates for this year. Great. Organize it. Engineer goes out. You then forget to put it in for next year or then forget to put the reminder in for three months. It’s just an absolute disaster. Trying to mark things green when the rent’s been paid to see whether, yeah, no. Yeah, if I started all over again, I would have got a property management CRM system from DayDot, 100%. I was going to add to that that we started using inventory hive about

Speaker (34:32.533)

five years ago now and that’s quite life-changing in terms of everything is already on there so doing a check-in is just so much easier and it’s so visual so you’re taking 50 pictures or 50 to 100 pictures of a room and a tenant can really see that you mean business and that this is the way the room’s got to be when they check out and house inspections come through that as well so you can check their room if there was an issue in the know the check-in perhaps the mattress need replacing hasn’t been replaced it’s just all there.

But I’d say if you have any disputes as well, it looks much more professional, much more professional for your landlords, if you’re managing for landlords. But that’s, we started on paper because of course we did, because that’s all that really there was to do. So having that, that’s amazing. Yeah, we’re exactly the same. that was one of the biggest things moving to inventory base from paper-based inventories. And when it comes to any deposit disputes, it’s just so much easier because the photos are date stamped.

and you are much more likely to get your money if you’ve had a really clear check-in and check-out report and if your photograph doesn’t have a date stamp they’ll just say tough you know you don’t get your money. So although again it’s money you have to shell out it’s actually money very well spent and interestingly we quite often get

young graduates coming for jobs and they bring their parents and the parents think, this is really good, know, full photographic inventory, all documented, they’re less worried that their little darling was going to be shafted when they leave, that kind of thing, and that can be quite persuasive in letting a room.

Okay, so let’s talk about void periods. The thing no landlord wants to hear is my room is empty. What things have you implemented in your agency to reduce void periods and make sure you’re ahead of the game and always keeping these rooms left? Lucy. I’m going to say that we focus on communal living in quite a big way. So I think that that helps a lot with void periods because if everyone in the house is, we age match in our houses within about 10 years as well.

Speaker (36:37.927)

and we are trying to like-minded people in the house. When we’re doing viewings, we’re talking to the people, if they’ve got bikes, this house isn’t for you because you can’t take your bike in the house and this house doesn’t have any secure bike storage. Look at this room and this room. If you don’t talk to these people and communicate effectively from the start, then you’re really setting yourself up to fail. I’d say communication is probably the number one thing. I always…

Pre, when someone gives notice, that’s when it starts and that’s communicating with the house. Do they know anybody? We offer a £50 Amazon voucher if they refer to somebody, because at least then they know who it might be coming into the house. They might have people at work who are looking. So yeah, really preempting exactly what’s going to come and making sure that, I mean, if I get to a week before somebody’s due to leave and I haven’t got a new tenant, I’m panicking because that will lead to a void period. yeah, it’s all very much upfront and making sure that everybody’s communicated with.

We do a meet your housemate incentive as well. perhaps because we only offer eight, nine to five, Monday to Friday, it’s just something that COVID sort of presented us with before that we used to do weekends and evenings. We now don’t because it turns out if you actually ask someone they can come on their day off or in their lunch break. So we do meet your housemate incentive, which means that the housemates already living in the house will then show someone around potentially after hours or potentially weekend. And if that tenant signs up and they’re both happy, then the housemate gets a voucher.

So again, that’s just helping with voids. We haven’t had terribly many voids, certainly since COVID. I it’s been nuts, really. We’ve actually had to create voids in order to get maintenance done. you know, at certain times you’d sort of have somebody leave one day, somebody else move in the next day. But now we actively have to say, right, we’re going to leave two days, three days, however much it takes because somebody’s booked cleaning or it needs repainting or a piece of furniture needs changing.

And whilst that goes against my better judgment, because I want the money in the bank and I want the room full, for the property manager team, they need that space and you need to keep up to date on your maintenance. Otherwise your rooms look shabby and then you do get voids. Has anyone got a particularly funny or interesting story or a time example of a time when something’s gone really wrong in one of your HMOs? Lucy, because we’ve all established ours can’t be said in this room. So Lucy.

Speaker (39:01.641)

wow. OK. So 21 years of HMO management left me with a plethora of things. I mean, I can tell you about the operatic singing talent that used to practice opera in the shower at 6 a.m. OK, so let’s go with… So I go to a house, and this is quite early on, and I walk into the lounge and the sofa’s missing. So I think, where the heck’s the sofa? This isn’t a big house. So I walk around, I can’t see it.

So knock on the doors to see if anyone’s in, ask where the sofa is, and one of the tenants is at home. And he says, yeah, I asked Alex about that. And he says he’s taken it to the dry cleaners. I said, sorry, he’s taken the sofa. He said, yeah, yeah, he’s filled a bottle of red wine on it. He’s taken the sofa to the cleaners. With that, just shut the door like it was completely normal. Needless to say, I tried to get a hold of Alex. And after, I don’t know, two, three, four days, a week, we did a welfare check, and Alex is on a bunk with all the furniture in the room and the sofa.

So that’s one. Another one is pets. So we’ve always had a no pet policy, but a tenant said to me, please, can I keep my bearded dragon here? It’s in a tank. I’ll pay you an extra 30 pound a month for the light and heat. It doesn’t ever come out. It doesn’t make any noise. And I was thinking, do you know what? That actually sounds OK. What I failed to ask that tenant was what they fed the bearded dragon. So when a tenant phoned me and told me, well, it sounded like they’re in the African jungle because the live crickets had escaped.

throughout the whole house. And when I went in that house, I cannot tell you the noise. So yeah, no pets. Fantastic. And if anyone wants the ones that she’s not willing to tell on camera, then come and see us afterwards. All right. What’s one bit of advice, Russ, that you would give to anyone starting out in HMO management or before buying their first HMO?

Er, don’t? No. No, it’s probably not You all think It’s not the right audience for that joke. No, it is about being organised and, as has been said, understanding what are you doing? Who are you renting to? I was having a discussion with somebody earlier, know, when we saying, well, HMOs do work everywhere, but it depends who they work for. Who is your target audience? If it is housing benefit, you know, if you go up into someone like Blackpool, and I’m sure there’ll be somebody that’ll tell me different, but…

Speaker (41:22.451)

Blackpool HMOs are very much the kind of local housing allowance model. Lots and lots of them doesn’t really work for professionals. So don’t go and try and do professionals if it really doesn’t work. But if you’ve done your research and there is absolutely a gap there for it, then you can probably clean up. But you do need to do your research. It’s not just a case of, this property is the right layout to do a HMO. I’ll go and put on suites in everywhere.

And then six months later, you’re wondering why nobody’s renting it because it’s not the right location, not the right price for the people that want to live in that area. you know, look at that and also, you know, look at everybody looks at all the who the employers are in the area, but also look at what might happen. So we just had a big employer pull out of our area, lots of 900 jobs, lots of people who live in HMOs, big warehouse, but it was a big food subscription service. So.

boomed post-COVID, opened up, fanfare, lots of jobs. And of course, everybody’s now got bored of all the fact they’re getting the same menu every week. And they’re now shrinking down the number of warehouses they’ve got because their business model’s changing. So, you know, look at the longevity of the big employers in the area and stuff.

Revise your view on intelligence. Yeah, it has a whole new meaning when you deal with HMOs. You know, can deal with professional tenants who have got MBAs, they’re idiots, and don’t have any household knowledge. We were talking earlier about what’s a fuse box and what’s a three-pin plug? The questions you will get asked.

Yeah, a revisual level of intelligence. would add on that point, if you use a hospital in any way, in any kind of regularity, do not rent to doctors because you will not want to go into those hospitals ever again. Doctors are the worst. are the grubbiest. They’re very, very busy people.

Speaker (43:27.697)

Yep, fine, but you’d have thought hygiene would be their strong point and it just isn’t. Rosemary, the doctors in the room investing in HMOs, as far as your retirement plan. I think that the success or failure of your HMO completely relies on the design and layout of your house. We have a landlord who sought our advice very early on and we said, you know, we can help you with the design and what have you.

He said, great, thank you. I’d love you to manage it. Went off and did his conversion without seeking advice. He had a really bad design because he left it to somebody who told him he was an HMO project management specialist and he just wasn’t. And he’s had to retrospectively change certain things, partly to meet regulations because he didn’t have enough cupboards in the kitchen.

He put an en suite, so it blocked half a window and completely destroyed what was a really nice room. And if he’d put the en suite at the other end of the room, it would have been completely different. But I think you seek advice, even if you have to pay for it. We have a deal with landlords that, you know, if they, we give them a bit of time for free, but if they have an in-depth consultation, we’ll knock it off their first management fees.

Although we do actually make them pay it upfront because otherwise they’ll do a bunk or may do a bunk. It’s money well spent even if they decide to self manage or whatever because we know what works. And if you don’t have enough cupboards in the kitchen or there aren’t enough bathrooms or things are just poorly laid out, people won’t stay very long. And this guy’s had to spend a lot more money because of the mistakes he made.

I can’t actually stress enough at this point what you’re all making is get your advice up front, isn’t it? Because, yeah, we see it all the time where people come to us with a product that they think is the right product because, you know, maybe they’ve spoken to someone online or they’ve seen a mentor and I don’t have problem with any of that. But what I do have a problem with is I know my market better than anyone based elsewhere in the country, just like Russell know his market and everybody else.

Speaker (45:43.42)

And sometimes you do get delivered a product and people say, oh, look at this HMO I’ve built. It’s lovely, isn’t it? And you go, actually, it is really lovely. But let me show you these three other ones that are like 10 times ahead of it. Because what you’ve done is built a product which was three years behind now. And why I say to HMO landlords, certainly in Chelmsford, is

almost every day we’ve got a new one coming to the market. So what was a really nice one last month, there’s an even better one, brand new, available today. So I think get your advice up front and also…

be prepared to reinvest in the properties to keep them up to date because as I say, there’s almost a new one being built every day where I am. So the standard is constantly being driven Definitely. And you also have to take a hit sometimes. We’ve just emptied an HMO, six bed HMO. So it’s a big hit financially, but it’s the only way to give it a proper upgrade because there’s only a certain amount you can do with tenants living there. And these days, yes, we have done projects where we’ve changed a kitchen

while tenants still live there and we sort of made temporary arrangements. But with health and safety going the way it is, you just take one tenant trips over something and you’ve got a lawsuit on your hands. So you do have to occasionally take a hit, you know, after 10 years of an HMO, it’s bound to be looking pretty dire. And just you’ve got to plan that into your business model and so that you can keep ahead of the game.

Can I just add something as well? People have talked about design and they go straight to the colors and the imagery. Actually, in terms of, especially if you’re going to self-manage, there’s loads of things that we build in. We’ve got the turnkey model, we’ve got the source in the interior design and the management. And the things that keep breaking, causing maintenance issues, we then feed back into the beginning of the process. Louisa, Lucy designed them into, and it’s silly things like door stops.

Speaker (47:44.954)

you know, 10 quid on doorstops will save you hundreds of pounds on and people don’t, is that element of design? Yeah.

Detail, detail, real detail. New landlords don’t often appreciate that and you only really get that with experience or talking to somebody who’s done it before. Hence getting your advice upfront because it makes all the difference and it saves you on the maintenance in the long run. Even just planning your room. So actually walking around your HMO before you, you you need a socket here, there’s going be a desk here, socket here. Then you don’t end up with plug adapters all over the room when you’re trying to show someone that room when that tenant’s moved in. It’s a mess and they can see all these wires going everywhere and they’re

asking

and the shape of the room. So we will always lay the furniture out. Louisa will spend a lot of time on this. Forcing the bed away from the wall and not getting box beds that will sit against a wall and cause damp and mould because you’ve got sweaty person in a bed with material against a wall. That’s just a disaster. That damp mould won’t happen. But if you went to a furniture pack company, most furniture pack companies,

they’ll sell you a box bed because it’s the cheapest. And somebody laying the room out will say, well, put it against the bed because you end up with more floor space. Actually, what you’ll end up with is spending money on fixing the dump problem. Yeah, and get four foot beds so you don’t encourage partners to stay over. Tricks of the trade. Yeah, if your agent can’t answer these questions or give you these tips, if you’re going out to hand them over, they probably haven’t managed enough rooms for long enough. Yeah, so some of the…

Speaker (49:50.263)

It does come down to the real basics. Even when we’re doing bathrooms, we quite often take a piece of cardboard cut to the size of the shower and the loo and the basin and jiggle them around to make sure that you actually can dry yourself in the bathroom. Because the student hall of residence we manage, we offered to help with the design and the landlord said, no, no, no, I can do it myself.

shower, pod things in, the shower cubicles are so tiny you cannot bend over to pick something up off the floor. And ridiculous things like that. you can’t do, the space is so tiny and you do have to be careful because otherwise people won’t stay any length of time. You know, if they’re always bumping their bottom on the basin when they’re drying themselves, they’re going to want to live somewhere different. Or the towel rack. Yeah. How?

But again, it’s designed like that. Totally. We just squeeze it in, a shower there. Yeah, what looks right on paper doesn’t always work on the ground. In the very early days, I went on holiday and I came back from holiday and I opened up the front door of the house I was managing and I kid you not, the landlord had built a bedroom in the kitchen. Just put it in there.

because he said, this house isn’t making enough money. And it’s like, okay, needless to say, I don’t work for that landlord anymore. So design guys, design. We’re gonna have one more question before we all go and put our head in the fridge. What are we gonna say? Right, we can’t not mention the Rentless Rights Bill. So what do you foresee the biggest challenges for HMOs?

Speaker (51:30.554)

Well, it’s really interesting because a lot of people are flapping about the rolling tenancies. The whole of the time we run our business, we have taken a month’s notice any time from day one. And that doesn’t scare us at all. It actually reassures a lot of tenants that if they don’t like it, they have a get out clause. And I think in 10 and a half years, we’ve had one person who’s moved out within a week and

and really nothing else. And it’s worked really well for us. So I’m not worried about that. Slightly worried about pets, depending how the legislation is worded and what have you, because that is just a recipe for disaster.

Not so worried about too much else except when it comes to students and that completely changes the student market unless they manage to do something differently. It’s fine if you’ve got the purpose-built student accommodation and you are registered as one of the whatever they are because you then that will be outside of it. But for anyone else who’s a student landlord, I imagine it’s going to be a complete nightmare.

So mine’s slightly related to that, the notice period. And it’s interesting because I haven’t seen anybody comment on this, but it’s the thing that keeps going around in my head. So it sounds great from a landlord’s perspective that tenants will need to give you two months notice. Yeah, sounds great. How long do most employers require for you to leave a job? if you’re more transient, by nature you’re likely to be a more transient person. If you’re a contractor or a young adult who could move wherever they want in the country for a new job.

and you give your one month’s notice in at your work and you go and you give your notice in at your letter agent and they say, well, actually this landlord is insistent that you give two months because that’s now the law. I think the reality is most of us will do what you do, which is to say, look, we can refill it within a month. But I think the issue with particularly for a type of self-managing landlord and probably corporate agents is it will create an unnecessary friction.

Speaker (53:40.441)

whereby people say, well, you have to give me two months notice. But I’m leaving, I’ve got a new job. And I just think it runs the risk of friction that just doesn’t need to be created. And it’s about the only thing I think the government are going to try and claim is an improvement, and it actually isn’t. I think in that situation, you would maybe look at a deposit type replacement rather than a traditional deposit, because they typically pay eight weeks.

So then you’ve got your rent covered and any damages because they aren’t blatantly just going to move out after a month, aren’t they? Because they have to move on. Their job is more important to them than paying us an extra £600 a month. But that’s still their liability. The deposit is still going to chase the tenant. for a landlord it’s a bit of security then rather than traditional deposit because you can then get, they’re going to do a bonus say after a month, they’re going to get that rent for the month and then they’ve still got some money in the pot for any damages. So I think that will kick off that scheme in a much bigger way.

Me, would say we’ve talked about it a lot today about processes, systemisation, organisation, being really organised with rent arrears, because I think that’s going to have a slightly negative impact, the fact that it’s increased so much and potentially you could be three months in arrears before you can even start applying for court, which is going to be a big difference. So if you can get your systems in place to be able to preempt that, get that upfront, really focus on getting the right tenants and making sure that all the rent is paid as it should be, and then that should have a help on that.

Well, think, yeah, I say I’ve missed anything. I think that’s probably quite a broad thing. So hopefully we provided you some value. Thank you very much for joining us and sticking with us as well.