Watch: Smart HMO design and planning strategies to maximise profit

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Good afternoon, everyone. Very nice to see you. My name is Giovanni Patania. I am the Archive Director at HMO Architects, and I’m joined here by the co-founder of our company, Ryan Windsor. Today I’m going to give a little bit of a speech around who we are, an update on the HMO market. We see it from the perspective of architects that we are working with HMO investors. And then we’re going to go through three case studies. Three case studies.

together. Before we start, just to understand who is in the room, how many are new starters in the HMO field? Okay. How many of you did two to four HMO properties so far? Okay. And how many of you did like a lot of HMOs and you are like smashing it? All right. Fantastic. That’s great. Thank you so much. So there will be a little bit for everyone today, at all different levels of knowledge and experience, all right?

So I would like to go back to 2017. 2017 is an important year for us because I started investing in property and we created our company, HMO Architects. And since 2017, we did over 2,400 project consultations specifically to HMO investors, as well as we completed 750 projects in England and Wales, and for a total of around 100 million gross development value.

So we’ve seen any sort of projects, case study. We’ve been through many different issues that we have to solve on sites, off sites. And we are HMO architects. We obviously focus mainly on HMOs, but also we do any strategy complementary to HMOs. So homes, flats, service accommodation. And we built a service which is specifically designed for

investors which are building a long-term, profitable real estate investment portfolio. And we can do that thanks to the help of our team. have a team of 14 in between architects and office managers. But also 2017 was also the year where it was a good year for investing, right? Because there were less Article 4 areas.

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less competition than we have today, and the construction cost is a big pain because it was actually in some areas almost a half of what is today, right? And I remember I’ve done my first six-bed HMO in Liverpool, and I’ve done six beds, four end suites, and a domer extension, a rear extension for ATK, right? So today is impossible.

a minimum of 160,000. So it was a great time and we didn’t know, some of us actually didn’t know that. Then we got Brexit, then we got COVID, and suddenly construction costs started peaking as well as the regulation became tighter and the competition grew as well. So last year, in between 2023 and 2024, there was actually a drop in the amount of HMO licenses being issued.

in the UK, obviously because of landlords not feeling any more that confident in investing. From our perspective, we still see a lot of HMO people coming to us asking to build portfolios, and large portfolios as well. And what is happening from our perspective is that HMO development is becoming more sophisticated, right? So it is becoming more difficult to access the markets, yeah? If you don’t know regulation, if you don’t know

what you’re doing, right? Today, we have more complex regulation, a lot of articles for areas coming up everywhere, like mushrooms, and the need to stand out is becoming more and more important, and obviously we have to be really cautious in making sure that our money is invested in the right place, right? Because of the high construction costs. So why do we keep investing in HMOs for?

the return on investment still, because if done the right way, it’s still one of the highest cash flowing strategies we have today, especially in the UK. The efficiency, a lot of condensed in the same property, which gives also us the opportunity for mitigating the overall risk, right? And also, the market has been rewarding HMOs in many places. The capital appreciation has been really…

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really strong and the rents are still going, really are increasing. Together, what we’ve seen also with the HMO reputation, because in the past, the HMOs were not seen under a good light because of the rogue landlords, right? People which didn’t know how to run properties. Those landlords are still there, but less and less the market is looking at them and the market is kind of seeing already what we doing here, HMO awards.

and there is more of an industry behind the HMOs which wasn’t there back in 2017. So if before you could almost buy blindly some of the properties, the video portfolio in most cases, PD rights were much more common than today, now you have to become more sophisticated. Like Sherlock Holmes, you have to really do your deductions properly.

So how do we keep winning in the HMO market? Leveraging smart design, I’m talking about from the perspective of the architectural company we run, of course, and assessing the right opportunities. So starting with leveraging smart design, we need to look at the holy table of HMO compliance, right? Everyone in this room should be really aware that in order for…

to have a long-term, fully compliant HMO portfolio, you need to be compliant with the three legs of the HMO compliance. And they are planning, building regulation, and licensing. A lot of our clients are still misunderstanding licensing with planning for some reason. They are separated, and they used not to talk with each other. They now started talking with each other. So be careful if you want to push the boundaries of the regulation.

And if you are not compliant with even one of these legs, the whole table will collapse. So your portfolio, your HMOs will not be compliant. And hence, you will not get the portfolio you want in the long term, right? So the principles behind leveraging smart design are be unique, right? Build your brand and your template to repeat your properties.

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to build and scale up your portfolio, as well as optimize the space, right? Or to optimize the space is a key aspect of making sure you squeeze every single square meter of your property and play with the rules. If you know well enough the rules, you can play with them and get a lot of massive profits. So we’re go through three different case studies. The first one is a seven-bedroom HMO in Portsmouth. The second one is a nine-bed HMO in London.

And the third one is a 35-bed HMO we did in Birnigam. These are all completed projects we’ve done in the last couple of years. So starting from B-Unique, this property here is in Portsmouth. And the refurbishment cost was $250,000. The value went from $350,000 to $750,000, rental from $900 per car in the month to $5,500 per car in the month.

a total of 60,000, 66,000 pounds per year. And this was done over 12 months. It’s a sui generis HMO with seven bedrooms. So in this case, the market was professionals as students. So how do you make sure you retain tenants for longer, you reduce void periods, and you maximize the value of your bedrooms? Interior design is a big component of that. And alongside the way you shape your

your space, the way tenants enjoy living in your bedrooms, Ultimately, you want to retain them as long as possible so you don’t have to pay the electric agent every time a fee to renew the tenancy, right? And you start with your visual brand identity. So build up a mood board with all your, the color palette, the furniture you want to include in your property. That requires, you know,

a hands-on approach in meeting furniture supplier as well as really understanding how you want to be perceived as a brand on the market. And then be aware of the habits of the tenants. Are you targeting students? Are you targeting professionals? Each market has a different need. So storage space is really high-speed internet, for example, for students and professionals working from home is a key aspect of your property.

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Storage is a really important part of your design, which sometimes is forgotten, right? So if you have built-in storages under the bed, as well as storage spaces for your tenants, that really helps retaining tenants for longer and reducing voids. Feature artworks, you know, making the space unique and pleasant to live. Reading lights or biophilic elements, which help really enjoying the space with the tenants.

These are some of the sketches we’ve done for this property in the process of building the property up. So it requires actually a lot of work to really define every single space. And at the end of the process, your team will put together a costing and spec list, which defines your template to repeat your investment strategy over and over again so you can scale up your portfolio.

And this one here is the final result for the seven bed HMO we built. So start with the mood board, then proceed with the ergonomic design, and then draft a spec list. You can do it yourself or even better, with the help of a consulting team. Number two, optimize the space. So this property here was completed in October 2024. The refurbishment cost was 850,000. The value was 800. The purchase price.

And now it’s worth 2.2 million in London, in Acton. We’ve been using with the Heal in City Council. And there was quite a journey, I have to say. Now planning and licensing are speaking. And it created a lot of issues because our client wanted to play creative and push the boundaries. And then he got the planning officer at the doorsteps. So that was a little bit of something we had to really play with.

The rental went from 2,500 per kind a month to 11,200 per kind a month. A total of 134,400 per annum, right? And this client already has three of these properties now, which are, the third one is almost completed now. It’s a 24-month journey. The planning process was really long, really long, because when you do these type of projects, it’s a nine-units HMO in Acton, London.

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you need to phase the planning. So you start maybe with the extensions. We did a side extension, rear extension. We leveraged all the prior approval PD rights. We cooled, dormer extension. And then after we secured all the planning application, we went all in with a suite generous HMO application for 11 occupants. And it took us 12 months only to do that. So if you want to put a property on steroids, you need to sit back, relax, and sort of

not hurry, right? You need to be in a position to pay off your bills because the planning game can last for a long time, especially if you want to put a lot of people under the same roof. And you want to do a lot of extension work. So, with this property, these are the floor plans. The space standards were key, right? The space standards, as you can see in blue, everything is new, right? All ensuite and…

all kitchenettes, all kitchenettes, right? So there is a gray area in between, you know, being a self-contained unit and not being a self-contained unit, and the kitchenette is that element which can, you know, which can really make the difference. And we’ll get to that in a moment, right? So these are the floor plans, the extension, et cetera. And these are the space standards we use, right? So a lot of our clients come to us with a spreadsheet, and they’re like, okay,

I want 12 bedrooms and four of them are 6.5 square meters. Wonderful, looks lovely on a spreadsheet, but in reality, how do you pretend a tenant can stay for more than six months on a 6.5 square meters bedroom in an area which is not a prime area? Maybe if he’s in London, it works, but if he’s not in London and he’s in another type of council.

it might not work. So we always discourage our clients to go for 6.5 square meters bedrooms and even to the extent of eight square meters bedrooms. So we think eight square meters is like the stretch, right? The sweet spot is nine square meters because with the amount of floor plants we built, we found out that nine square meters is a good compromise in between the size of the room, the storage space, the features, the cupboard, desk to work remotely, right?

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So we always recommend nine to 10 square metres to start with. With bathrooms, Also with bathrooms is another thing. We don’t do bathrooms usually unless there is space of 2.5 square metres, right? We always do bathrooms which are 1.8 square metres to obviously save space, right? We only do wet rooms, 1.4 square metres, if it’s really needed. Because as you know, wet rooms, they need to be tanked, right? They leak if they don’t…

if they’re not done properly, right? And so we’ve done a number of wet rooms, but only in cases where there wasn’t enough space, right? Because it’s like the last resource, the wet room, because they can leak, they cost more money, right? We’ve done them mostly in London, right? Where it makes sense to spend additional money on these kind of features.

Kitchenettes, right, kitchenettes. A lot of our clients come to us and they want en suites and kitchenettes, because why? Because it increases the rent, right, a lot. And people stay for longer, and you are, is a block of flats in these guys, right? The planning officer comes to you, he’s like, you’re running a block of flats, no, it’s an H &M, it’s an H &M. And we have this conversation many times, right? And the kitchenette is what makes the difference, right? Because you need to understand what features

the kitchenette needs to have with the local city council to avoid the planning officer sending a planning enforcement notice for you to remove the kitchenette, right? So in our experience, there are three types, three levels of kitchenette. They are obviously kitchen, Believe it or not, some of our clients, HTML investors, they installed full operating kitchens in their bedrooms, and then an year later, the planning officer called by the jealous neighbor,

came in and he asked him kindly to remove the kitchenettes and the kitchens in this case, He wanted oven, built-in oven, built-in cookers, and even a washing machine. This bedroom, this property had 11 washing machines, right? It happens, it happens in the HMO world. But he had to take all out, right? The kitchenette in the middle, right, is like the sweet spot, is the sweet spot because you don’t have built-in facilities.

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but you have self-standing facilities, right? The self-standing cookers, right? So if the officer comes, you can sort of remove it if needed, but you can still show that the property is fully compliant. That is kind of, the team-making facility is without the cooking facilities is when most of the councils will allow you to have a kitchenette without any issues, right? But for safety, we never include kitchenettes in the planning applications, right?

So they are added afterwards, we are in between investors, know what I mean, right? So team making facility is the way. Just to reiterate, a lot of our clients, first of all, they come to us even though they have 10 years of experience in investing, and they think planning and licensing are the same, they’re not the same, right?

You can be compliant with licensing but not with planning and vice versa. The fact that you have a licence doesn’t mean anything. And most importantly, they start speaking with each other. So, it’s now more difficult to conceal of floor plans from the planning department, which are different from the planning application you actually got approved. Last one, play with the rules.

is a property in Birmingham. This one here is a Class E building, office building. So it’s a big, big property with a lot of history, actually. A really lovely property. The refurbishment cost was £900,000. Really low, I have to say. Value, £800,000 from £800,000 to £2.6 million. Rental from £5,000 to £18,000 per can in a month.

and annual rental income was £216,000 per month. Timeline, 22 months. And the beauty of that is that it wasn’t done with a full planning application. So you start basically with a Class E building. No planning application involved. No, sorry, no full planning application involved. But you buy a Class E office building which has a lot of requirements. can Google it. Then you turn it into a block of flats, right?

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And then the block of flats is converted into an HMO. Each flat is converted into an HMO, right? So in the first part, you do it with prior approval, which is a form of application which has less requirements than a full planning application. And then you do the rest with the PD rights, right? So once the building is up and running, you convert the flats into HMO bedrooms. In the meantime, each flat has like two or three bedrooms

with end suites, right? So you really crafted the layout in order to be shaped accordingly. So this one here is the floor plan of that property, and each unit is a flat, as you can see, and each flat has a number of bedrooms. So you start with 11 flats in this case, and you end up with 35 HMO bedrooms under PD rights.

Lastly, know, so leverage is my design is we cover all the points, assessing the right opportunities, it’s gonna be short. So one of the main pain points is to find the right opportunities. And we often are asked by our clients to provide a design appraisal, a design feasibility service to the properties to understand if everything works the way you want to work. So we are…

working on a platform which is called Portfolio Builder, where basically we help our clients. We give our clients a client portal, first of all. So if you are our clients, you automatically get the access to a client portal. And we basically help you learning about the investment strategies, assessing the right opportunity, and managing the pre-construction and construction phase of your project. So if you are interested, you can join the waiting list, which

by going on our stand out there. So thank you so much for the attention. I hope you find the content of today valuable. Thanks