How to Make Passive Income from Shared Houses (QUIT YOUR JOB!)

Hey everyone, welcome back to my channel where I help entrepreneurs and business owners just like you to amplify their income and their impact. 

In today’s video we’re going to be talking about how to make passive income from shared houses so that you can become a millionaire in seven days, just kidding. Buy my course though and you will become a millionaire in seven Days now i’m just kidding with you, but if you do want a method to allow you to quit your job and be financially independent then this video is perfect for you. 


Let’s get straight to it, the very first tip I have for you on how to make passive income from shared houses is to get educated and I really suggest that you watch this video here. Where I give you all of my top tips on how you can best get educated in property. 

Now the reason I say this is because shared houses otherwise known as hmos in the uk. So houses of multiple occupancy the reason i say that you need to get educated before you invest in hmos is Because they are a more complex strategy. 

Right so it’s not as easy as just buying a House doing it up and letting it out. So make sure you watch this video here before you do anything else, like going and buying a house.


The second tip I have for you when it comes to making passive income from shared houses is to work backwards so start with the end in mind. 

What I mean by this is just having a number or a goal that you are trying to hit with your net monthly profit that you’re getting from the rent. So let’s just say that you needed £1500 a month coming in to cover all of your expenses and all of your essentials. 

That means that you’re aiming to buy a property that will net you £1500 a month which would then allow you to leave your job now it’s super important to know the difference between gross rent and net rent because you’ll see a lot of numbers being thrown around sometimes if someone is pitching a hmo investment to you. They might say oh you know this brings in 3.5K per month but that’s usually the gross profit. 

You want to look at the net profit so the net profit is what is going to be left over to you as pure profit after all of the costs have been deducted and this is exactly why i say that you need to get educated because the costs associated with a hmo are so much higher than if you were just doing a single let. 

As a hmo landlord you are responsible for paying for all of the running costs of the property so that will include um the internet, water, electricity, gas if you have it at the property council tax um a weekly cleaner, netflix subscription or a tv licence this list isn’t exhaustive so you really need to have a clear idea of exactly what costs you’ll be paying every month. 

So when you’re working backwards and you look at how much rent a certain property would achieve as a hmo and we’ll look at that. Soon you just want to be working off of the net profit that you’re going to get so make sure that you estimate your costs as accurately as you can. 

You tally them all up and then you always are on the side of caution with your monthly net profit so just as a really general rule of thumb: you’re running costs for hmo including your mortgage payments.

I forgot to add that earlier that was like a big cost um but they’re going to come to about 30 of the total gross rent so as you can see it is a more advanced strategy and you need to know what you’re doing which is why i highly recommend watching this video here on newbie mistakes to watch out for when you’re investing in property for the first time.

Even though it is a more advanced strategy as you can see if your number is around let’s say 12-15 hundred pounds a month then you could actually replace your income with just one property investment which absolutely made the joys of property.


The next tip I have for you when it comes to making passive income from shared houses is to buy on demand and this is really important. I’d probably say this is the number one reason why some people might say hmos don’t work or the market is oversaturated. 

There are too many shared houses because they haven’t really done their due diligence and they haven’t bought a property in an area where there’s a lot of demand because unfortunately if your property and your rooms aren’t full then you are just about going to break even on costs. 

So remember your costs are likely to be around 30 let’s just say you have a 50% occupancy um so half of your rooms are full then you’re only really going to be left with like a few hundred pounds a month or potentially you might not even be able to cover your costs. Now the way you can buy to demand is to have really specific location criteria. 

If we think about who lives in a shared house it’s typically young people, students, young professionals who want to really be close to the action so with the end-user in mind so really think about your demographic. 

Our goal is to find a hmo that is close to public transport routes, so either stations or bus routes. We also want a home that is close to supermarkets as most young people do not own cars, so they want to be close to supermarkets and also, ideally, to a town centre.

These are my location criteria according to my end user um so young professionals but you need to think about who you’re looking um to let the property to and what the demand is in that area and then work backwards now the best way to test how many people are looking for a room in an area is using Spare Room

What you want to do is you want to go on the advanced search and you firstly want to search for the number of rooms in your area and in your specific postcode that are available to let. Then you want to do another search again by going into advanced search and look at the number of rooms that are wanted in that area and then you can look at the ratio between them and you can see if there is more demand in that area. If there are more rooms wanted than rooms available or vice versa and you can really use Spare Room to have a good look at the competition in the area. Have a look at what other landlords are doing. You can have a look at whether they tend to let single rooms or double rooms, whether they tend to include an ensuite or not and just really use their room as a way of understanding what the demand is in your particular area.

Now before I move on to the next tip, if you want to learn more about actually starting a business so that you can use that cash flow and that income to then invest in property then make sure you download my 0-10k social media roadmap. It’s down in the link below. 

This guide will walk you through the step-by-step process to hitting your first 10k in your business so that you can then invest it into property. It’s exactly what I’m doing so make sure you grab it in the description box below.


The next tip I have for you when it comes to making passive income from shared houses is to think about your different options for funding your property purchase. Now i could do a whole video series on raising investment or private finance for your property investments so if that’s something you’re interested in then let me know in the comments below and i’ll create a video for you but in this video here i just want to give you an overview of the different financing options you have. So that you can start thinking about how you could finance a property investment like this. If you are currently in a job and you are earning money then your best bet is to just save that income and create a cash pot that you can then use to invest in a hmo or a shared property. 

Then you can actually do that while you’re at your job so that when you leave your job you already have that property set up and you have your income sorted. That’s the first option and I would say probably the easiest but if you are not in your job then the other option you have is to start a business. Start a business that actually cash flows money which you can then invest into property.

Now obviously the second option of starting your own business it’s obviously harder but it’s also going to be a lot faster because you’re going to be able to create a limitless amount of income you’re not capped at anything. If your business really takes off or when not if but when it takes off you know you could be making so much money that you can then just put straight into property. 

Whereas when you’re in a job you’re going to be capped by your earning Potential but those are your first two options. Your third option is to go out there and to raise that money from private investors but I would only recommend this option if you are more advanced and you’ve actually educated yourself in what you’re doing. 

If you have never raised money before, it’s best to create an investor pack or investor document that outlines the specific investment or property that you would like to fund, or just an outline of the overall business plan you have.

Although it’s a lot harder to raise investment if you’re speculating um but you want to collate all of the information into a document that you can then send out to your network so to your family, friends or any other contacts you have that might be interested in investing with you. 


Now your final option for funding your property investment is to use credit cards. Now obviously you’re not going to be able to buy a whole shared house using credit cards, because you need money for the deposit. 

You also need money for the works you need a lot of money but it is important to remember that you do have access to things like credit cards and personal loans so that if you need a little bit of top-up in your capital then that’s always an option and you can actually get 0% interest cash credit cards. 

It is literally amazing it’s like the best thing since Sliced Bread go on: by the way this isn’t me giving financial advice um but this is just me telling you what you could do and you can have a look at all of the different credit cards that are available. 

Like with zero percent interest so what that means is you won’t pay any interest for a certain amount of time and that can be as long as 36 months in ages but there is like a small transfer fee that you pay so that you know you pay when you get that cash into your account but it’s usually only two to three percent. 

If you think about how much you want to borrow that’s actually not that much money but again i’ll say it’s a more advanced strategy. I don’t want to be liable for getting you into credit card debt use with caution.


Now the next tip I have for you on how to make passive income from investing in shared houses is to think about the management of your property and make it as hands-off as possible. So for the management of your property you’ve really got three options. 

The first one is to self-manage, the second one is to use an agency and the third one is to do lettings in-house so basically to create your own lettings agency. 

I would really advise against the first one um unless you are looking for a challenge um because a shared house is going to have more than three people living in it and if you tend to get you know a problem tenant then that’s going to be really hard to manage.

Managing one tenant I think is a lot of work already but managing five different tenancies or more in one house is I would say almost a full-time job so I would only really consider managing the tenants yourself if you really want to get as much cash flow as possible from the investment. 

If you do choose to do that however it’s really important to think:

  • How much is one hour of your time worth to you?
  • How much would you make in one hour if you were actually working in your job or in your business?
  • Are you saving more than you would have made in one hour?

If that makes sense because most of the time you’re going to end up putting a lot more um hours into managing the property than you think and even though you’re going to be left with more of the profit and the rent every month you’re likely actually going to be better off just outsourcing it and letting someone else do it. 

Which brings me on to the second option you have which is using a management agency and this is the one I would recommend but it’s really important to do your due diligence here. 

So once you have your property investment and you’re looking to let it out then make sure you speak to at least two or three landlords in the area that are using that agency and ask about their experiences because management agencies they tend to overcharge for a lot of like routine maintenance stuff and some of them don’t know what they’re doing so just make sure you get a good one. I would really recommend this second option if for example your shared house is far away from you isn’t close to home or it’s one of your first property investments then it’s usually best to just leave it to the professionals especially because there’s a lot of regulation around hmos and they will know how to be compliant whereas you as the newbie property Investor might not now. 

Your third option for making it as hands-off as possible is to actually bring lettings in-house and management In-house so actually to employ someone part-time and to create the whole system around managing your property now this won’t really make sense for one property but with your first hmo Investment it’s really important to  note down the system and everything that has to be done. 

So that when you eventually might want to bring lettings in-house then you know exactly what needs to be done and you can actually do it. 

That it makes sense to bring lettings and management in-house when you have around 25-30 rooms. That’s when it makes financial sense so it won’t be right at the beginning but it’s just something to bear in mind so that you can start preparing for that eventuality.

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