Today I’m delighted to be joined by Sarah Watt, one half of Alt Street property along with her husband Andrew.
This is our 2nd episode as part of our 2021 HMO month where we’re focussing on the strategy that allowed Victoria and I to leave the corporate world behind and talking to investors who have used HMOs to achieve similar results in their own lives.
Sarah started investing in her early 20s in Sydney, Australia and continues investing to this day alongside her busy day job, albeit now in the slightly colder climate of Northampton.
Since joining our HMO challenge in 2019 she’s added 3 HMOs to her portfolio, going against the conventional approach of major renovations allowing them to get properties up and running and income-producing in record time. During today’s interview, we talk about what drew them into the world of HMOs, the biggest challenges they’ve faced in growing their portfolio, and the numbers behind one of their typical HMO deals.
Listen to this episode below:
Here’s what we discussed this time:
4:36 – Sarah talks us through her life before property investing. She tells us how she is a qualified accountant originally from Sydney.
5:40 – When did they first decide to start investing in property?
7:22 – The idea of renovating your own home as a starting point to your investing journey.
7:55 – Sarah talks about how it started off as a side hobby before they moved to Melbourne and they did some profitable flips, while still working the day jobs.
8:22 – Mike asks about the Sydney property market and specifics of money and value. Sarah relates it back to London and discusses it being a capital growth market.
11:10 – Sarah talks about the moment they realised the properties were making more money than their day jobs – although it wasn’t the intention.
13:03 – They discuss the move to the UK and how it came about. Why have they stayed here now? They sold up in Melbourne and started the UK property portfolio from scratch.
14:03 – What was it like investing in a different country and market? Sarah tells us how different the Australian market is to the English one, and how it is a bit more similar to the Scottish one.
14:56 – Auctions are very common in Australia too, as well as it being a different way of buying and process.
15:30 – The HMO market was completely different and Sarah actually had no idea what a HMO was until 2018. It’s very uncommon in Australia.
16:17 – What made them realise how lucrative HMO’s could be? Sarah tells us how they started off with what they knew (vanilla buy to lets) and did single-lets locally. They still have them now, but they decided in 2019 to explore the HMO market.
17:07 – Sarah discusses how mentally they had this idea of voids, antisocial behaviour and a lot of turnover.
19:34 – Sarah tells us how she has had positive experiences so far.
21:30 – They discuss how Sarah jumped onto the Inside Property Investing HMO Challenge and how comfortable she later felt going into HMO’s once she had soaked up more knowledge.
23:46 – Sarah talks through what their HMO portfolio looks like now. They got the keys to the first property in October 2019 and, since then, have bought another three before Article 4 came in. She credits thorough locational research that they learnt on the Inside Property Investing course.
24:39 – Mike reminds people that it is rarely linear, but don’t expect too much – the first 12 months are often about building the knowledge. Think of it as a curve, not a straight-line progression.
26:09 – Sarah discusses some of the steep learning curves of the first HMO project. Once she cracked that nut, she says it was easy to go onto the next ones.
26:52 – They talk through the numbers of their first HMO. It is based on Northampton bought for £252,000, which was market rate for that time but has significantly risen first. It was on the market for £270,000 but the vendors kept trying to sell it to families who couldn’t raise finance. They came in as investors with no lower chain and ready to go, so they accepted. Sarah says they became known as being chain savers by the estate agents!
28:32 – Spent £9,000 on the refurbishment as it was already part-converted as a five bed, three bathroom townhouse. It was a very de-risked HMO, which was great.
30:50 – Sarah talks through going slow and steady and looking at it as a long-term investment.
32:35 – She tells us how the refurbishment was completed in three weeks and then they advertised the rooms. They got their first set of tenants within three weeks too.
34:51 – Sarah says how they have never had any arrears across the portfolio.
35:51 – They discuss why they wanted them close to each other.
39:31 – Sarah talks through their biggest challenges with setting out on HMOs, especially considering they are very risk adverse.
43:17 – Sarah discusses the risk of Article 4 and how it increases their risk or makes them need to look outside of the area they are in at the moment.
47:53 – What are their longer-term plans? Sarah hopes to go full-time into property but Andrew will continue to be in his job because he loves it.
51:40 – They talk through the misconception of needing to leave your job to grow a HMO portfolio. Some people quit too early, in fact. For Sarah, the long-term sustainability was key.
54:33 – Advice to others looking to start out.
The Links We Mentioned :
To find out everything we’ve got going on this month to help with your own HMO investing, head to insidepropertyinvesting.com/HMO
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