Some of the first houses that I bought with my next-door neighbour Mark were what you would call a House of Multiple Occupancy (HMO). To me, they were just big houses that I rented by the room.
Renting by the room gave us more cash flow than renting a whole house so we bought more of them.
It was all going fine until one Sunday morning…
Mark wakes up to 17 missed calls. He picks up the first message and it's someone who urgently says,
“Mark, there’s a fight at your property on Albion road, you need to get down here. Now!”
Mark arrives at our 10-bedroom HMO to find the windows smashed. The front door has been torn off its hinges and there are holes in the walls of every room downstairs.
Five of the ten tenants have already packed their bags. One of the tenants is now in hospital.
The property has £30,000 of damage and half the tenants have left.
Later the same day, Mark gets a call about our second house on Valley Road. Mark drives to the house to find the same damage as our Albion Road house. The place has been trashed and half the tenants have left.
This is a smaller house which has £20,000 of damage.
Two of our houses get smashed up on the same night with £50,000 of damages because we bought houses in the wrong area and filled them with bad tenants.
When you buy in the right area and you rent to the right tenants you reduce your risk of this happening to almost zero.
That’s one of the secondary benefits of buying property to my golden rules. You see the primary benefit is the houses profit from cash flow and 2 other methods which makes your portfolio 4 times more profitable.
The secondary benefit is that you attract Lifer tenants. Tenants that will rent your house for 5 years or more and treat it like their own.
The only reason why I survived my beginner mistakes is a rising market. If I made those mistakes today or in the coming house price crash, then I would lose my shirt and someone else’s life savings.
My first 10 houses were a disaster. They cost me time, money and many sleepless nights.
Then I learned from my mistakes and created my golden-rules. Once I started buying houses to my golden-rules…