Everything You Need To Know About HMOs
It goes without saying that there are many different ways you can invest in property these days and there are some that are much more well known than others. Single buy-to-let properties or buy-to-sell properties tend to be the most commonly understood property investment strategies, however, this doesn’t necessarily mean that they are the best option available. There are lots of others that should be considered too.
One particular property investment strategy that isn’t as well known is HMO (house of multiple occupancy) and below, our team here at Fielding Financial have looked into this in more detail. For many, it is a brilliant option to consider, so hopefully, we can answer any of the basic questions that you may have in relation to HMOs enabling you to contemplate whether or not this is a property investment strategy that would work well for you.
What is a house of multiple occupancy (HMO)?
The Government state that your home is a HMO if both of the following apply:
- At least 3 tenants live there, forming more than 1 household
- You share toilet, bathroom or kitchen facilities with other tenants
The property can also be considered a ‘large HMO’ if at least 5 tenants live there too. HMO properties themselves won’t always look the same either, from a house to an apartment building, they can differ dramatically in size.
Who can you expect to be a tenant at a HMO?
House of multiple occupancies can work incredibly well for many different tenant profiles. You can expect everyone from university students to professional tenants to be interested in HMO properties. Of course, depending on many different factors, such as the location and layout of the property, you may find that your HMO investments are aimed more at one tenant profile than another and it is worthwhile ensuring you know who the HMO is for when investing.
Do you have to be a HMO landlord when investing this way?
As you may expect, being a HMO landlord can be a lot of hard work, you will be taking care of multiple tenants. Some property investors will choose to be the landlord themselves, however, others will instead choose for their property to be fully managed by an agent. If you decide to go ahead with a HMO investment, it is worthwhile looking into both options further.
Why choose a house of multiple occupancy over a standard buy-to-let?
There are numerous benefits to opting to invest in a house of multiple occupancy when compared to a standard buy-to-let property and here are a few you should take into consideration when contemplating this property investment strategy;
- Higher rental yield
As expected, when investing in a HMO, because you’re renting individual rooms rather than a property as a whole, you can expect a higher return on your investment. Many HMO landlords make much more from their rent alone.
- Growing demand
Lots of tenants simply can’t afford to rent a whole house, and this forces them to look at HMOs instead. If your property is in a desirable location, you can expect a lot of interest from tenants looking for affordable housing.
- Less rental voids
Landlords tend to worry about their property being empty and not making money from tenants. With a HMO, you will find rental voids less impactful, if one tenant moves out you still have other rooms tenanted, so you will still have an income.
- Streamline your portfolio
- When you invest in HMOs, you prevent yourself from needing a large portfolio to get a higher income. They allow you to have fewer properties in your portfolio but still benefit financially. It can make things much easier for you.
Investing in a house of multiple occupancy
Hopefully, you will now know a little bit more about this property investment strategy and why it is such a brilliant option for property investors to consider. Of course, investing is incredibly personal and what is the right thing to do for one investor won’t necessarily be the best for another, so take your time to think about everything mentioned above and contemplate whether you could see yourself investing in a HMO property.
If you would like to expand your knowledge in regards to property investment in general, please visit the Fielding Financial website today. As a company that is devoted to creating professional property investors and helping them to become successful business owners and entrepreneurs, you can trust we are the perfect people to contact. No matter what type of property investment strategy you’re interested in, you can trust we will be able to assist you further.