HMOs: Capitalising on the Student Population

Many potential HMO property investors are understandably cautious about letting their properties to students. According to a YouGov survey, 40% of landlords said that they would not do so. However, they may be missing out on lucrative investment opportunities by not capitalising on the student market.

Research is Key

The majority of student rental properties are HMOs, or Houses in Multiple Occupation, in which a minimum of three tenants, who are not related to one another, share communal facilities such as bathrooms and kitchens. Specific licences and pieces of legislation apply to such properties. It is therefore vitally important that landlords are familiar with their responsibilities and the requirements of HMO ownership. 

Typically students are less fussy about the homes in which they live than traditional renters. It is therefore possible to rent out older properties with a higher number of rooms. However, landlords should be aware of the increasing demand for more luxurious properties with home comforts such as flatscreen TVs, high-speed WiFi and en-suite bathrooms. This demand is highly dependent on the university, the area and the type of student the landlord is attempting to appeal to. Research is therefore key.  

Considerations

When purchasing and maintaining an HMO property, there are a number of considerations a landlord should take into account. 

Primarily, they should consider the priorities of students, who will want to live close to campus and nightlife and have local amenities readily available, but will be unlikely to opt for an expensive property. They may care little about living in a beautiful location or on a busy road. Potential landlords should browse student forums to research exactly what type of property students in their area are looking for.    

When furnishing a property, landlords should be aware that most students will be expecting a fully furnished property, with washing machine, fridge-freezer, cooker, chairs and a table in communal areas and a bed, wardrobe and desk in each room. Fairly plain walls and flooring are acceptable to students, as this allows them to personalise their houses to create a home from home.    

Given the reputation students have, it is probably wise for landlords to have more thorough contracts in place that might be unnecessary in other situations. This may include, for example, clauses in which students must promise to keep noise to a minimum.  

Advantages 

If landlords carry out sufficient research, moving into the student rental sector comes with several advantages.

Some landlords are concerned by the prospect of collecting rent from students. However, such worries are unfounded. Students, whose rents are usually subsidised by loans, are very often backed by solid guarantors (their parents) and, in the case of international students, up to six months’ rent can be paid in advance. It is therefore highly likely that landlords will receive their expected rental income. 

Contracts for accommodation are settled early, often by the end of the first term. This reduces the risk of void periods, giving landlords peace of mind. 

By offering properties to students, landlords open themselves up to a wider range of potential tenants. The likelihood of empty properties is greatly reduced in a larger market with fewer competitors. 

The rental yield which can be achieved by letting an HMO can be three times higher than that of a conventional Buy-To-Let (BTL) property. 

In Conclusion

If you are considering investing in HMO property, talk to the team at The Mistoria Group, who are experts in high yielding property investments in Liverpool, Salford and Bolton