With the demand for affordable renting at an all-time high, HMOs currently seem like the perfect investment.
The yields that can be achieved are far greater than a standard buy to let with some of my clients tripling their current rents. As soon as you have tasted the return of a HMO it’s very hard to go back!
I have helped clients achieve maximum rent by turning their properties into HMOS and have also got some of my own however with the highs there also comes lows and my blog is going to teach you the pros and cons and the dos and the don’ts of HMOs.
It’s very important to do your homework and make sure you familiarise yourself with the minimum standards set up by your local authority, you also need to find out if your property will require a licence or not. It’s important to follow the rules as you could be liable to hefty fines for breaching them.
Here is a link to our local councils minimum standards-
When you are out viewing, take you minimum standards to refer to, a measurer (I recommend a laser for speed) a note pad for your measurements and notes on any reconfiguration you require and a camera to take photographs. Always price your works up and allow room for issues and always price your rents at the minimum rate, never work out your numbers based on best figures you can achieve.
When you are number crunching you need to take into account monthly expenses you will be expected to pay for such as utility bills, council tax, TV licence, Wi-Fi, insurance, cleaning etc all of which will eat into your profit. If you are using a managing agent then you will also need to allow for letting and management fees.
Managing a HMO is not for the faint hearted, you will find that there is normally more maintenance to attend to, lots of regulation you need to follow, regular fire alarm testing and a regular turnaround of Tenant.
Here are some of my HMO buying tips
- Make sure there is a demand for HMOs in the area – City’s, large towns and anywhere with a Uni should have a good demand.
- Don’t expect an easy ride, this type of property management is the hardest.
- Ask your council for the current minimum standards and HMO guidelines and follow them
- Apply for a licence if required
- Have a fire risk assessment and make sure you have carried our safety checks.
- Don’t expect long term tenancies, HMOs are normally short term.
- Factor in all expenses when buying a HMO and working out the rental yield, I try to look for a net of at least 10% +
- Maximise your income by renting out Garages, HMO tenants will not expect access to this so this extra income can help towards maintenance/management fees and the same for parking spaces.