Investing in HMO properties can be very tempting for a buy-to-let landlord. Typically, HMO’s provide a significant increase in revenue as they are let to individuals on a room-by-room basis.
Often including four-ten rooms, these are normally rented out to single tenants.
Rents in a HMO normally include utility, broadband and council tax bills. With individual bedrooms rented for exclusive use, the majority of HMO’s will include communal areas, such as dining rooms and a lounge.
HMO’s are extremely popular in UK locations with a high population of students and young professionals. Should you be looking to invest in a HMO, you must consider the pros and cons.
Yes, you will be able to attract larger revenue but it is not all plain sailing. You will have to screen more tenants and conduct Right to Rent checks on more people.
In addition, it is important not to forget the basics, such as getting a sufficient landlord insurance policy for your investment.
When you have the basics in place, follow these tips to build yourself a profitable HMO portfolio:
- Purchase the correct property-This sounds simple enough, but make sure you invest in the correct HMO. Look for a property with at least five rooms as profits are likely to grow with an increased number.
- Location is key-Follow the old rule-location, location, location! It is imperative that you research the area in which you want to buy. Check out its universities and amenities to try and gauge the type of people looking to live in the region.
- Transport yourself there-Assess the transport links in the region. Search for a location in close proximity to university campuses and check the bus, tram and other public transport routes.
- Be sure on budget-As an investor, you will know how tempting it is to overspend on your chosen property. However, particularly with a HMO, you must make sure you devise and stick to your budget. Chose furniture that is able to be cheaply replaced and do not spend lots on fixtures and fittings. By nature, more people in a property will lead to more chance of damage, so budget accordingly.
- Get to know your market-Always look to manage your development to match up with local market conditions and trends. Research into competitors in the region is key, as is checking out local amenities, in order for you to gain some local expertise.
- Be law abiding-It is vitally important that you are confident with the various laws and legislation that you must adhere to. You have obligations under gas, smoke alarm and fire safety, as well as Right to Rent and energy efficiency. If you are not confident in adhering to these rules, enlist the help of a letting agent.
- Use reputable tradesmen-Always enlist the help of honest, reputable tradespeople to carry out any refurbishment. You do not want to be returning to jobs that have been shoddily finished, so ask around for recommendations.