Houses of Multiple Occupancy (HMOs) are a surefire strategy for investing and growing your wealth. As a would-be HMO investor, you need to understand that not all HMO investments are created equal. Maximising your return on investment will require a solid HMO strategy, an understanding of market demands, and thorough assessment of your potential property’s quality before purchase. This blog will walk you through the steps you need to take, so that you can be confident that you are making the right HMO investment.
HMO Sources
Where do you look for your HMOs? There are plenty of easily available properties which are publicly advertised, usually through estate agents and property websites. At Investinhmos.co.uk, we list many properties, with detailed search filters on price, bedroom number, gross yield and more. Working with estate agents and services like ours make things easy and straightforward. However, these avenues are available for anyone looking to invest in UK property, which can mean competing with more HMO investors, bidding wars and higher prices.
If you want to put more work in, you can find HMO investments from off-market sources. This will involve networking with and directly contacting property owners. Whilst this could potentially get you a better deal because of fewer people competing over your HMO investment, it can be more complicated, take longer and requires you to be a skilled negotiator. You may get a better deal by paying a professional to source your investment property for you.
Key information about your HMO
You’ve identified one or more potential HMO investments – how do you know if it’s right for you? Depending on your HMO investment strategy, the answer may be nuanced. However, there are some key things you should think about and research before you invest:
- Local demand – this is simple economics. If there is not demand for HMOs in the property’s area, you are likely to find it more difficult. Research the local property market. Things to look out for: recent growth, gentrification, urban development. You can also check the ratio of rooms wanted to available rooms on sites like Spareroom.
- What’s in the local area – How close is the property to employment hubs (if you are looking for young professionals) or educational institutions (if you are looking to create student HMOs). How accessible is this HMO to transport links and main roads.
- What rent could you expect for a room in that area – if you are going to work out your gross returns, you should do some competitor analysis and see the average rent on a room in the HMO’s area. This is easy to find on any renters website like Rightmove or local estate agents.
- Quality of the property – this is essential. How many floors is the property? How many rooms? What amount of work and investment will be required to transform the property and bring it up to HMO regulations? All of this can be discussed with your trusted estate agents.
- HMO Legislation – UK property legislation changes over time and legislative changes can sometimes come into effect in the area where you are looking to invest. It’s essential that you stay ahead of this legislation so as to not have unseen costs in the future.
When to invest in an HMO
Become an expert in the location that you are looking to invest in and keep aware of any local or national changes. In this economy and UK property market, no investment comes without risk. Your research may lead you to reconsider your location and invest in HMOs somewhere else.
By having a solid HMO investment strategy and a wide pool of potential HMOs to source from, you give yourself the best chance of investing in a lucrative property. Ensure that you fully understand the shifting renting demands of a location, the proximity of employment, education, and transport. Always be clear on the amount of investment that will be required, not just from the purchase of the HMO, but meeting building legislation and any repairs or other works that may be required. Finally, take note of the expected rent you will get from each room to ensure that this will give you a good ROI. Whether you decide to gather this information yourself, or work with a professional, this knowledge will empower you to make data-driven decisions and make your investments a success.
