341: Richard Nicholls on the ins and outs of selling HMOs

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Today I’m delighted to be joined by Richard Nicholls, founder of The Property Advantage which as far as I can tell is the larger specialist HMO brokerage in the UK, helping landlords sell HMOs they no longer want, and investors buy ready made income producing assets.

Richard’s approach is to view every HMO the company sells, so with hundreds of transactions completed he’s probably got a better insight into what makes a good HMO, and as importantly, what makes a bad one than virtually anyone else in the UK. 

So why’s he on the show today?  Well his business partner Jessica contacted me a few weeks ago and we had a good chat about the HMO industry and their unique insights into it.  I explained that we were opening our Inside HMO Investing programme at the end of March and that I’d love to present his story to show an alternative exit route for HMO landlords as well as his views on what is and isn’t working with the properties he views.

Listen to this episode below:

 

Here’s what we discussed this time:

5:27 – Richard starts at the beginning of his journey from doing an internship in an estate agents, to telling us his elevator pitch for who and what he is today.

9:04 – He talks about the gap in the market that he found in relation to HMO landlords and selling HMOs.

11:53 – He tells us about moving out of London and knowing what he’s good at. It was knuckle down time three years ago and time to set up the business.

13:43 – Richard says how he wants to become the go-to industry brand for selling HMOs.

15:00 – He talks about the sheer amount of variables that come with HMOs and how there aren’t any other property types that come with quite so many variables. There are lots of things that can go wrong.

16:25 – Richard believes that he has to visit each HMO that he is going to be selling – they are all so different. They are steadily training valuers.

20:38 – He talks about the importance of housing solutions and not simply saturating an already saturated market. It has to be on point with the local housing need so that people respond well to the price point.

22:53 – Richard tells us about some of the mistakes he sees on a daily basis – namely, going too big too soon.

26:41 – He talks about the difficulties behind valuing HMOs, particularly when it comes to people having spent too much on refurbishing their property.

29:20 – Mike asks Richard who the typical buyers are coming to him for HMOs.

34:19 – There are always going to be people wanting to come in and buy high-yielding, well put together HMOs, but they are a specific type of buyer.

35:48 – Richard talks about some of the different reasons why people might come to him to sell their HMO, from problems with refinancing to lack of clear strategy when they went into the project.

38:09 – He talks about the types of sellers who do it as part of their strategy. HMO landlords are starting to realise that there is opportunity in not keeping hold of all of their properties – these are also the types of people that might go to Richard.

40:39 – Mike asks about the HMOs Richard sees that are doing really well. Is there an ideal HMO?

‘It’s solely down to the managing agent a lot of the time […] If we get a portfolio that comes to us with a self-managing HMO landlord, you are almost nearly at 100% occupancy. They tend to have created a property business that suits that local tenant base […] They are the HMOs that have the best occupancy.’

47:00 – Richard talks about the key aspects behind HMO health for landlords.

49:21 – He talks about the energy drop-off that exists in HMOs when expectations aren’t met.

50:45 – Mike asks Richard about the future of the HMO market and if he gives much thought about where the market is going. Is it going to continue to be such an in-demand market in the future?

What happens when all the HMOs run out?

53:40 – Mike asks Richard for his honest opinion on a tenant demand point of view. Is demand dropping off?

1:00:00 – Richard talks about what is selling well and the notion of flipping HMOs as a strategy.

1:05:00 – Mike asks about the realistic figures and percentages in HMO valuations. Richard talks through some of the elements that go into it and gives some examples for specific areas.

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The Links We Mentioned:

Find Richard on Instagram @thepropertyadvantage or on Facebook here. For more information, visit their website here.

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