What Tips Can You Give a New Investor in HMOs?
Posted on 27th September 2018 at 16:02
A house in multiple occupation or HMO is an increasingly common buy to let opportunity that has gained in popularity in recent years.
Essentially a HMO is a house that is occupied by two or more people who not part of the same family. It can include flatlets and bedsits, student accommodation, lodgings and self-contained flats created by a conversion
Size is Important
You need enough room to cater comfortably for your tenants. HMOs are attractive because they cost less to rent than traditional buy to let properties. The general advice is that you should look to a property that can hold about five occupants if you want to receive a decent return on your investment.
It also pays not to get too greedy. Avoid trying to sneak in extra rooms just to make a profit. If a room is too small and too expensive the likelihood it’s not going to appeal to a tenant.
Pick the Right Location
You want your HMO to be close to the local amenities. That’s because the majority of HMO tenants don’t have a car (it would also be difficult to accommodate them all outside the property). That means they don’t want to spend a lot of time getting to their place of work or study or whatever they do.
Settle on a Demographic
Most HMOs tend to cater for a certain type of customer. For example, if you’re in a university town it’s quite reasonable to assume that you’ll be looking to attract students to your property. A HMO near the city centre might be more suitable for young and upcoming professionals.
Mixing different types of tenants rarely works, so have a clear idea who you are aiming your property at and organise your refurbishment and advertising to reflect this.
Check If You Need a Licence
One thing that puts property investors off is that most HMOs need a licence from the local council. This applies if you have five or more tenants, the property is used over three floors, and they share facilities such as the bathroom, toilet, and kitchen.
Converting the Property
Unless you are buying an existing HMO, you will undoubtedly have to do some work to convert your property. This is going to depend on the type of tenant you are planning to cater for. The council are likely to inspect your property under the terms of your licence so the first thing you need to make sure is that it’s habitable and meets all the latest health and safety requirements.
If you are undertaking major renovations to convert the property, you may also need to apply for planning permission.
Victorian style homes, particularly terraced houses, actually lend themselves quite well to conversions such as this. The rooms tend to be larger and usually have a good loft area which adds extra space. Your conversion is going to be the biggest expense apart from the purchase of the property and you need to work out the finances to deliver everything you need.
Finally, you’re going to find the turnover of tenants a lot higher than with other rental models. Students come and go, as we all know, but so do professionals. They move jobs or decide to get a place of their own. This is part and parcel of having a HMO and something that you will need to put a strategy in place for so that you are never short of tenants for too long.
If you are looking at investing in a property to convert into an HMO and are struggling to find the right one, contact us today to find out how we can help you.
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