Best ways to add value to HMOs

Keen to add value to your lucrative HMO (House in Multiple Occupation) investment?

Regardless of whether you want to release more capital following a refinance or are seeking a better HMO mortgage interest rate, there are many benefits to adding value to HMO property.

Luckily, Mistoria Group is no stranger to renovating HMOs and even has a dedicated renovations manager overseeing this types of project.

Below, we explain some of the best ways to add value to HMOs. From extending to updating, there’s no shortage of ways to increase the profits on your property investment.

Why add value to an HMO?

When you’re already letting an HMO and receiving a stable income, it can be difficult to consider spending more money on renovating the property. However, if you choose to add value to the HMO, you stand to benefit from much more than just a higher rental income.

First, you may be able to refinance the property and release more capital that can be re-invested into another project. On top of this significant benefit, a renovated HMO should result in a lower loan to value ratio which typically leads to more favourable HMO mortgage interest rates.

As a result, you could profit from a higher rental yield, a lump sum of capital, and improved HMO mortgage rates. Not to mention, if you decide to sell the HMO to another investor or landlord in the future, the property will be worth more (subject to other market conditions and the economic environment).

The best ways to add value to HMOs

Now we’ve covered the potential benefits of adding value to HMO property, let’s explore how you can add value to your HMO.

While a lick of paint and a few updated appliances always make an attractive addition to a young professional or student HMO, more significant renovations are likely to add far more value to the property.

You make money when you buy

A well-known saying for investors and other professionals in the real estate industry is: ‘Money is made when you buy, not when you sell’. In simple terms, this means that the property price is one of the biggest factors that determine your profitability when you come to sell or rent the property later.

As a result, it’s important to find an HMO property that has plenty of potential to add value as well as a reasonable price tag. The lower the price tag, the more funds you’ll be able to spend on adding even more value.

Extending the property

While not always a possibility for every property, a loft or basement/cellar conversion can add between 10 and 15 per cent value to the HMO and is ideal if you can’t extend outwards.

The average cost of loft conversion in the UK is between £21,000 and £44,000, while a cellar/basement conversion can cost considerably more at an average of £2,800 per square metre.

This is a substantial amount of money to spend renovating your HMO, but it will leave you with an additional room that can increase the number of tenants your property can accommodate.

Plus, some changes can be made to your loft space without seeking planning permission, saving you both time and money.

Updating the kitchen

The hub of any HMO, a kitchen with a good layout and high-quality appliances will add instant value. Because HMOs are popular with students and young professionals, creating a large communal space where they can socialise is incredibly attractive to this target demographic.

This means that replacing a few cabinets and appliances in a small, over-crowded kitchen is unlikely to lead to an increase in property value. A full kitchen re-design, however, can make this space larger and more functional, creating that sought-after communal area where tenants can cook, eat, and entertain together.

While a full kitchen re-design typically costs thousands or even tens of thousands to achieve, it can add anywhere between five and 15 per cent of value to the property.

Improving the interior design

Ultimately, good interior design helps landlords secure tenants for their property. If you can demonstrate that you show care and attention to the interior of the property, potential tenants are more likely to have a positive experience, stay longer, and feel more confident leasing a room from you.

Not to mention, tenants expect an HMO property to have a high-quality finish and to come complete with key pieces of furniture. The right furniture, fittings and fixtures will all be required if you want to rent out the HMO for a higher price than alternatives on the market. However, reliable and fashionable furniture needn’t be expensive.

Instead of over-spending on the interior, you should try to furnish the HMO with affordable, stylish, and comfortable pieces of furniture that are also easy to clean and maintain. This will help to keep costs down because furniture can simply be cleaned time and time again instead of being replaced.

Revamp the bathroom

In an HMO, the bathroom facilities are essential and typically shared – unless each bedroom or household has an ensuite. This means every tenant in the HMO will benefit from an updated bathroom, but at what cost to the landlord or investor?

Fortunately, transforming the bathroom needn’t break the bank.

Instead, a fresh and modern sink, new shower, and toilet can make a significant difference to the visual appearance and functionality of these facilities.

These changes are far more affordable than altering the bathroom layout and plumbing, but still add plenty of value to the property.

Introduce off-street parking

Off-street parking is a sought-after perk for many young professionals and even students living in HMOs.

Not only can off-street parking lower car insurance costs for your tenants, but it also provides them with 24/7 access to a private parking space, giving them peace of mind and a sense of greater security for their vehicle.

As the owner of the HMO, you can expect to spend anywhere between a few thousand to figures in excess of £15,000 if you want to add off-street parking to your UK HMO.

The exact cost will vary depending on the price of dropping the kerb, redesigning the garden, and installing a suitable driveway.

However, before you automatically consider off-street parking, it’s important to do your location and target market research.

If your target tenant is unlikely to drive or the HMO property is located close to a train, bus, or tube station, it may not add as much value as you were hoping for.

While off-street parking is advantageous in rural areas, in a prime city location, it’s rare and therefore could add no end of value.

Working with Mistoria

Here at Mistoria Group, we’ve built an impressive team of talented property professionals to provide our clients with expert advice and guidance on their renovation project.

With years of invaluable experience adding value to HMO property, we’ve seen our top tips results in higher profits and revenues.

If you want to find out where the value lays in your HMO and where you can add value, don’t hesitate to get in touch today. Specialising in property in the North West of the UK, you can find our offices in Bolton, Liverpool, and Salford.

Alternatively, you can also get in touch straightaway by giving us a call on 0800 500 3015. We also welcome enquiries submitted via email to info@mistoriagroup.com as well as those made using our handy online contact form. Upon receiving your enquiry, you can rest assured we’ll be in touch shortly to learn more about your HMO renovation project.