“Why are they selling their HMO if it cash flows so well?”

I get asked this a lot, usually by first-time investors. Landlords sell for all kinds of reasons, but usually one of these:

• Falling out with a business partner
• Divorce
• A change of strategy, often moving into development
• "I prefer buy-to-lets"
• They can't make the HMO work: worn out from self-managing, or stuck with a bad managing agent
• They need the money for other ventures
• Retirement
• They made money on the refurb and are selling at a yield price for a profit
• They were overpromised a "commercial valuation" by the sourcer who sold it to them
• They've had a good stint, built a portfolio, and it's time to sell
• Tax

Roughly half of those reasons are positive and half negative. So it's about managing your risks and making sure your exit is on your terms, not forced on you.

A property investment is an investment on the way in, during, and on the way out, and all three need to be right: buying at the right price with the right lending, running it properly, then selling at the right time in the most tax-efficient way.

Too much is made of the glory of a glossy refurbished HMO, the "potential" gross income, and the keys-held-up-outside-the-front-door photo. We need to respect the middle and the end just as much as the beginning.

The risks

• Not doing enough due diligence on every front
• Expecting too high a revaluation and basing all your numbers, and your ability to pay people back, on it
• Self-managing when you're not experienced or ready for it
• A managing agent who doesn't care about you, the property, the tenants or the occupancy
• Overspending on the refurb and trusting one person with the whole project
• Treating the HMO as too hands-off
• Basing your numbers on room rates you might only get from the first batch of tenants, while it's shiny

Plenty of the landlords I work with are getting themselves out of a pickle caused by one of those risks. But so much of a good exit is in the preparation, and getting it right from the start.

First posted on my Facebook page. Lightly edited.