[00:00:00] Hey, I'm Andy and you're listening to the HMO podcast. Over 10 years ago, I set myself the challenge of building my own property portfolio. And what began as a short term investment plan soon became a long term commitment to change the way young people live together. I've now built several successful businesses.
[00:00:20] I've raised millions of pounds of investment and I've managed thousands of tenants. Join me and some very special guests to discover their tips, tricks, and hacks. The ups and the downs, the best practice and everything else you need to know to start, scale and sytemise your very own HMO portfolio..
[00:00:40] In today's episode, I'm going to talk to you about a number, and this is a very important number to me today. I want to talk to you about why this number is so important to me and perhaps more importantly, what I'm doing about this number and how I am going to get to this number. This is an episode I'm really excited about sharing with you today.
[00:00:58] It's the type of episode I haven't done before on the show either. We often talk about things that have happened in the past. Well, today I'm talking about the future. So if you want to find out what all of this is about, make sure you stick around. Please sit back, relax, and enjoy today's episode of the HMO podcast.
[00:01:17] Hey guys, it's Andy here. We're going to be getting back to the podcast in just a moment. But before we do, I want to tell you very quickly about the HMO roadmap. Now, if you're serious about replacing your income, or perhaps you've already got a HMO portfolio that you want to scale up, then the HMO roadmap really is.
[00:01:32] Your one stop shop inside the roadmap, you'll find a full 60 lesson course delivered by me teaching you how to find more deals, how to fund more deals and raise private finance, how to refurbish great properties, how to fill them with great tenants that stay for longer, and how to manage your properties and tenants.
[00:01:48] We've also got guest workshops added every single month. We've got new videos added every single week about all sorts of topics. We've got downloadable resources, cheat sheets and swipe files to help you. We've got case studies from guests and community members who are doing incredible projects that you can learn from.
[00:02:04] And we've also built an application just for you that allows you to appraise and evaluate your deals, stack them side by side, and track the key metrics that are most important to you. To find out more, head to thehmoroadmap.co.uk now, and come and join our incredible community of HMO property investors.
[00:02:24] Okay.
[00:02:28] Welcome back. So today I'm going to talk to you about a number, and this is a very important number to me. The podcast title gave it away, didn't it? Okay. And this number is 40 million pounds. This is a number that keeps me awake at night. This is a number that I spent a lot of time thinking about. It's a number that is behind a lot of what I'm doing on a day to day basis.
[00:02:51] In fact, this number actually represents a big part of everything that I'm doing in business and outside business as well. So it's a really important number to me. Today, I want to talk to you about why it's so important. And more importantly, what I'm doing to get myself there. The reason I wanted to share this with you today was because I wanted to give you a bit more of an insight as to how I look at the long term.
[00:03:13] We talk regularly on the show about the importance of setting goals, but usually that's in the context of a 12 month timeframe. And yeah, we regularly drop anecdotes, don't we? Property's a long game, buy property and wait. And that's all true. Absolutely. But. When I think about my goals and my objectives, and when I think long term, I think long term.
[00:03:34] So I think about 10 years, 20 years, 30 years. I think on those sorts of timelines. And this figure is part of that long term plan. And it's not just a random figure. And I decided to record this episode today because I recently posted something in the community. I asked the question, would you rather have a million pound in cash in your bank today?
[00:03:56] Or would you rather have 10 HMO properties, all making you a thousand pound a month forever? Okay. Just a really sort of simple question. Didn't provide much more detail to it. And everyone, loads of people in the community piled in. And it was really, really interesting to see the answers. And some of the answers were quite surprising to some people.
[00:04:18] And part of the reason was because some people, in fact, probably more than many were expecting, said that they would just take the money. Our community is called the HMO community. A lot of us are actively investing in HMOs and we want to do that because we want to generate the cashflow. But it was really interesting because a number of people said.
[00:04:37] that they would have the cash because the idea of managing 10 HMOs or an additional 10 HMOs wasn't that attractive to them. And actually I resonate quite strongly with this. And this figure, this 40 million that I'm talking about today feeds into this as well. So let me explain what I'm talking about.
[00:04:58] I've been buying HMOs since 2009, so well over sort of what, 15 years now, something like that. I've bought a lot of properties, I've converted them into HMOs, I've done a lot of refurbs, I built an agency, scaled that up, exited it, I've bought and invested in several cities in different parts of the UK, I've done students and professionals, I've got a lot of experience buying property.
[00:05:22] I can tell you quite honestly, even with the best systems and processes in the world, it's quite hard work. And whenever I hear someone talk about maybe having 50 HMOs or a hundred HMOs in their portfolio, owning hundreds and hundreds of properties, it makes me wince a little bit. And the reason is. When you run an agency like I did that I exited successfully last year, it gives you a really good understanding of what it's actually like to manage large numbers of tenants.
[00:05:52] When you're managing hundreds of rooms and hundreds of tenancies, it really gives you the ability to actually experience what the reality of being a landlord on that sort of scale would be like. And the truth is there's an awful lot to do, even with a great team and great systems and processes. There's so much that you've got to do.
[00:06:13] Reality is being a landlord is a job that just doesn't ever stop. There's always going to be something to do that falls outside of what your traditional managing agent on the high street can even do. For example, issues with your drains or issues with your roof or issues with your neighbors. There's lots of stuff.
[00:06:29] And the more properties you have, the more likely you are to experience these sorts of issues and. You can imagine that when you've got a large portfolio, there's a very good chance that at any point on any day in any given week, you're likely to be dealing with something to do with your portfolio, even if it's managed by somebody else.
[00:06:48] Okay. That is just a reality. It is quite frankly, impossible to not be involved. These are your assets. You've got to make important decisions, informed decisions on your assets. Do you reinvest in them? Do you replace the roof? Do you remove a tenant? All these things. And the more properties you've got, the more decisions that you have to make.
[00:07:06] You simply cannot extricate yourself from all of it. If I'm being totally honest, the idea to me of owning hundreds of properties when I'm in my twilight years really is not that attractive at all. And on the current trajectory, it is absolutely going to be hundreds of properties. The pipeline of stuff that we've got on at the minute and the flats that we've just finished will in itself be about a hundred flats.
[00:07:30] That’s not even HMO stuff. So this is really front of mind for me. And I probably think about it more than you might expect, but long term, I don't want to own hundreds of properties. This figure, this 40 million, this is the flag in the ground for me. Okay. This is that long term target. And probably the best way of trying to underline it is that's me at.
[00:07:51] Retirement, official retirement. Now I don't have an exact date or an exact age that I want to retire. And I'm pretty sure that I'll probably never want to completely retire. However, this figure is important because this figure drives a lot of the decisions that I'm making today. And here's why. 40 million for me represents, if that's assets, 40 million pounds worth of assets.
[00:08:18] If with just a broad brush approach, you said that you had that leverage, that 75 percent loan to value 25 percent of the equity of that 40 million pound portfolio would be yours. So 10 million pounds. Okay. Following me that 10 million pounds represents your equity. And the way that I think about this is when I get to retirement or when I get to a point at which I feel like I don't really want.
[00:08:44] To do much in the way of managing properties, I would extract that 10 million. I would crystallize it and I would decide what to do with it. And if you look at investing and if you look at what you can do with your money, you can put it in various places, a really simple, but very easy to track and project and compare benchmark is putting some of money into the stock market.
[00:09:09] Okay. Super boring, but stick with me again. I'm not saying that is absolutely what I would do, but if you took that 10 million and you put it into some tracker funds, and let's say over the remainder of your life, they performed at just 5%, that 5 percent on 10 million is the really important bit for me.
[00:09:29] Okay. That 5 percent on 10 million per annum is 500,000 pounds per year. Okay. That for me is the purpose. That for me is what 40 million actually represents. 40 million pounds worth of property and assets. Actually, it's the equity and it's what I could do with the equity and putting it away and getting 5 percent on it per annum.
[00:09:53] Is me saying if I wanted to be completely hands off, have nothing to do with managing my money whatsoever, and I wanted to put it somewhere incredibly safe, 5 percent is probably quite realistic. It's probably actually quite pessimistic, right? Certainly if you look at long term averages of performance in the stock market.
[00:10:13] But anyway, that's a pretty pessimistic view and it gives you a good idea of, okay, well, if I had 10 million pounds of equity up to crystallizing 40 million pounds portfolio, and I was able to get 5 percent per annum on that equity, it would equal 500,000 pounds net income per year, obviously before. Tax, and that's without having to lift a finger for me.
[00:10:35] That's the goal. That's the objective. And as much as that figure is the target at the moment, the objective of getting there as quickly as possible is a key part of the goal as well. Now there's a very good chance I'll hit this goal. Well, before I get anywhere near my twilight years, and that's fine. And I'm not saying for one moment that.
[00:10:56] As soon as I hit this target, I'm going to crystallize my portfolio because that's not what I'm going to do whatsoever. But having that target now, it's a big driver and it does represent how I'd like to be able to live and lead my life after property and business one day, if I get to a point where I decide I'm ready to just do something different, and that really is the big goal for me at the minute, and it's a really important one for me because.
[00:11:20] For a long time now, I've struggled to really, really motivate myself and I mean, really motivate myself to get up and build new businesses and take much bigger risks, take the really big risks by thinking simply on a year to year basis. When I started out investing, it was very much day to day, week to week, month to month.
[00:11:40] After a few years, it was about making decisions that over the next few years would potentially impact my life positively, give me additional cashflow, maybe allow me to leave work, maybe allow me to move into a slightly bigger house, things like that. But now because the goalposts have moved and because the projects are bigger and because the volume of projects is bigger, and because there's businesses in the mix and things like that, and there's just a lot more going on, what I actually want to do on a day to day basis.
[00:12:09] isn't significantly impacted or influenced by the results of that stuff in the short term, actually. I really enjoy doing all of that, but it's not the short term results that motivate me. It's now the really big long term goal that really motivates me. And that's what I get really excited about. So that 40 million goal for me is what gets me up in the morning.
[00:12:29] It's what gets me really fired up in January. It's what pushes me and drives me, motivates me to make the tough decisions and take the bigger risks, because I know that that is ultimately where I want to end up. So why am I telling you this and how is it relevant to you? How can it help you? Well, I suspect a lot of our listeners haven't thought as black and white and as far ahead as this.
[00:12:52] And so the first thing that I wanted to do was through sharing this example, really highlight the value that this exercise and having a goal like this can provide. I want you to go away and I want you to have a think about it. If you haven't got a goal like this, if you haven't got a target like this that you're working to, please go away and have a think about it.
[00:13:09] What do you want your life to look like? What does that need to look like financially? Not all goals should be financial targets whatsoever, but I think there is some value in Looking at your vision board and then kind of like underlining that with, okay, well, you're probably going to need X amount to make that work, to be able to live and lead that life.
[00:13:26] What does that figure look like for you? So if you want to know what that looks like in terms of overall asset value, reverse engineering, look at your vision board, figure out what you think that that lifestyle is going to need and cost you every year. Work out what that figure as a yield based of, um, percentage of something looks like.
[00:13:45] So for me, I used 5%, didn't I? 500,000. If that was 5%, it represented 10 million pounds worth of equity. And remember, I chose 5 percent because for me, that was an example where I am now pretty sure that that would be almost entirely hands off. So that's why I chose that example. You don't have to, you might be happier being a bit more hands on or being a bit more high risk, but that's how to do it.
[00:14:09] Okay. Work out what it's going to cost to fuel your life at that point. Apply some sort of yield based figure to it that represents again, how involved or uninvolved you want to be, and remember to be realistic, and then that will give you an equity figure, that equity figure. If that represents a portion of the capital you've got tied up in assets, let's say it is 25 percent of your overall property values because you've got 75 percent loan to value mortgages on everything else.
[00:14:35] That will give you your overall portfolio value. So go and do that exercise. If you haven't already, have a bit of fun with it, play around with it, see what it looks like. It might surprise you. You might be on the way to completely overshooting it. You might find that actually you're going to have to do something quite dramatically different.
[00:14:52] Maybe what you're doing right now, one property at a time, just adding value, doing flips, maybe in all honesty, when you look at it like this, it will show you that it's just not going to be possible to get to your goal within a certain period of time. If that's the case, that's what prompts you to take those bigger decisions.
[00:15:11] That's what prompts you to really step things up, look differently, maybe move into the slightly bigger projects, which is exactly what I've done as well. I wasn't going to get to where I ultimately wanted to be by just doing one HMO after the other. So I think this is a really important exercise, but I think it's an exercise that you can have some fun with.
[00:15:30] You can be creative with. And like, it can just get the sort of entrepreneurial juices flowing. I talk a lot about business on the show and how building a business, certainly one that can fold into your property interests can be a really great way of accelerating your wealth development. Joint ventures, partnering with people can really help accelerate what you're able to do and achieve and how fast.
[00:15:52] So have a think about all of this and have a real play around, but hopefully, and I'm sure you will, you'll find some real value in doing this. That is pretty much it for me in today's episode, guys. What I think I'll do is check back in on this very episode at some point in the future. So when I hit it, I'm going to come back and I'm going to dig this episode out.
[00:16:09] I'm going to remind you that I recorded it and maybe celebrate hitting that 40 million goal. Don't forget that I'm on hand over in the HMO community, guys, with over eight and a half thousand members. Now really is an incredible place to discuss things like this, to discuss anything in fact, that you might need help or guidance or support with when it comes to building a property business and more specifically HMO property business.
[00:16:30] Of course, if you're already doing that. And you've already committed to doing that, then head on over and check out thehmoroadmap.co.uk. That is where you will find absolutely everything you could possibly need. Your vault, your library of resources, your toolkit to HMO investing, all for the price of less than a cup of coffee every single day.
[00:16:50] And guys, if you are listening to the show and you enjoy the show and you find it valuable, Whether you're just finding us for the first time, you've just discovered us, or if you're a regular listener of the show, you maybe even been listening from the very beginning, if you could find 30 seconds to leave a really, really, really quick review, I would be so incredibly grateful.
[00:17:07] It helps more than you could possibly know. It helps us continue. to bring great guests onto the show. And it really does help continue to spread the message about all the great stuff that you guys out there in the community, in the HMO community are doing. And slowly, but surely we are changing the narrative on HMOs and the importance and the role that they play in the wider private rental sector in the UK.
[00:17:30] So thank you so much. You've got 30 seconds to do that. I'd be really, really grateful. That's it guys. Don't forget that I'll be right back here in the very same place next week. So please join me then for another installment of the HMO podcast.