Listen to this episode below:
Rick was just a normal guy working as an operational Police Officer. After a hard night shift he came home and had a conversation with his son that changed his life forever…
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Rick has been focussing on HMO investment since he started, however he now faces tougher challenges in his core area as article 4 has now been introduced (article 4 legislation when relating to HMOs adds restrictions to changing houses into HMOs and removes the permitted development rights for this purpose).
In the main, this makes it difficult to buy anything other than an existing HMO as this means planning will already be in place.
The portfolio management is relatively passive (taking Rick around 4 hours per week) so his focus now is moving towards helping others systematise their own property management. He discusses his entire paperless tenant application process during the call, and it’s well worth a listen for anyone who deals with tenants and would like to reduce the time this takes.
Property has enabled Rick to do some of the most important things in his life that he never thought he’d be able to. He can spend significantly more time with his family, taking his kids to and from school. He’s created a football team allowing his son to play a sport he loves, and he’s bought a holiday home on the beach making family holidays significantly easier.
This has all come about by his HMO investments, and one of his favourite deals happened very early on in his investing career. Just 2 days into a 12 month education programme, Rick and his wife found a property that really suited conversion to an HMO.
They had an offer accepted of £178,000, but realised they had no money to either buy or convert the house, so they started to approach family members about their new strategy and found an investor in Rick’s father-in-law. They agreed a joint venture where his father-in-law would put in the money, Rick would do all of the work and manage the property on an ongoing basis, and they would split any profits 50/50.
They needed a £47,000 deposit along with £20,000 for renovations, so a total investment of £70,000 after adding on stamp duty, legal fees etc.
The 6 bedroom HMO they ended up with rented for £2,166 gross per month (now significantly higher than that), and after costs they had a monthly net profit of £841. Not bad for your first deal!
Rick has so far managed to avoid any disastrous deals, which he feels is down to the due diligence process they do on every deal before proceeding with it.
Mortgage rates are stress tested at 6%, voids are always factored in at 10% and maintenance at 5%. They have specific cash flow targets in mind, and if a deal doesn’t meet this target after chipping away all the costs, they simply move on to the next one.
What’s Your Favourite Book?
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The Miracle Morning: The 6 Habits That Will Transform Your Life Before 8AM – Hal Elrod
The Chimp Paradox: The Mind Management Programme to Help You Achieve Success, Confidence and Happiness – Steve Peters
Rick Gannon’s Links & Resources
HMO Discussion Group – Join Rick’s HMO specific facebook group
Email Rick Gannon – Got a question or looking for some advice? Get in touch with Rick here.