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Deal Stacking

Updated: Jan 9

So, let’s talk about Deal Stacking: AKA understanding whether your HMO investment will provide you with the level of profit you need to replace your income.

There are two key things to consider:


To estimate whether or not a potential HMO is going to be a profitable investment, you need to understand the costs. Ultimately, if the costs are going to be too high and leave you with very little financial return, this won’t be the right HMO for you.

With every potential HMO investment, you should be calculating the following:

Mortgage costs: I always advise to stress test mortgage costs at 6% upwards. Though the majority of mortgage products are actually below this percentage marker, calculating at this level will ensure you don’t over estimate your potential return.

Insurance: You have to take the time to source the right insurance product for your property. Remember, that cheap doesn’t mean it’s right. You need to ensure you cover every eventuality, with many products offering full liability for the property in the event of malicious damage, i.e. Arson. Take the time to shop around with this one – I guarantee it will be worth it.

Voids and Maintenance: There will be times when your HMO has empty rooms and it’s important that you account for this in the deal stacking process.

We always allow for 10% off the gross monthly rent for voids and 5% for maintenance. There is little point in believing your HMO will achieve 100% rent at all times with no maintenance issues. It’s unrealistic and will prevent you from accurately assessing whether the property is profitable when not at capacity, which is the real test.

Utilities: You may think differently, but we always provide our tenants with all-inclusive bills within their monthly rent. Not only does this make the offer more attractive to tenants as they can budget more easily, but keeps tenant and Landlord relationships more positive.

The cost of utilities varies from property to property, but many utilities companies will provide you with a fixed fee per person to aid you in your calculations.

Council Tax: If you have decided to rent to Students, then your property will be exempt from Council Tax. But if you are renting to Professionals, you need to take this cost into consideration when undertaking the deal stacking process.

Stamp Duty: The best way to work this out is by using a Stamp Duty Calculator online. Although an initial one-off fee, it’s still extremely important.


Once you have worked out all of your costs, you can work out the ROI or Return-on-Investment of your potential HMO investment.

The ROI is calculated by taking your annual profit divided by the total amount of money required to be put into the deal x 100.

End Game? Remember to have a planned exit! What does that look line for you?

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