Many property investors will have heard of HMOs, even if they have not themselves invested in such properties. Yet they may be missing out on fantastic opportunities for higher yielding, lower risk investments. There are a number of advantages to HMO ownership, which we have detailed below.
What is an HMO?
An HMO, or ‘House in Multiple Occupation’, is a property in which three or more tenants, who are not related to one another, share communal facilities such as bathrooms and kitchens and pay rent to an owner, most commonly on a monthly basis. This is a simplified description, though, as there are a multitude of restrictions and guidelines which vary from one local authority to another.
What are the Advantages of Becoming an HMO Landlord?
There are a huge number of reasons why you should consider becoming an HMO landlord, especially in the North West, where rental yields are particularly impressive. Here, we break down some of the key reasons potential landlords might choose to invest in the HMO market.
Increased rental yield
The rent on an HMO property is considerably higher than that achieved in the traditional buy-to-let (BTL) market. When renting a property to a family, for example, you can only collect one monthly payment. When you rent out an HMO, however, you receive payment from every tenant. Often, HMO rental yield can be as much as three times higher than a conventional BTL arrangement.
Some landlords invest in a large number of properties to create income. By investing in HMOs, however, you can earn more with fewer properties. That means you don’t have the stress of managing a huge portfolio.
For those considering a buy-to-let investment, Liverpool and Salford regularly outperform other cities in terms of rental yield. There has never been a better time to invest in property in the North West.
Fewer void periods
In conventional BTL properties, finding a new tenant to move into your property when a former tenant vacates can be a lengthy process. During the vacant period, you collect no rent and cashflow soon dries up. This is disastrous for those intending to live off the earnings from their property investments. However, in an HMO property, if one tenant leaves, you will still have an income from the tenants who remain.
Less exposure to arrears
The other advantage of having a number of individual tenants in your property is that if one fails to pay their rent, the effect is somewhat mitigated by the payments of the other tenants. Your risk is spread and cashflow can therefore remain relatively constant.
Demand for HMOs
Investors should look to invest in HMO properties in areas heavily populated with students and young professionals, where there is an exceptionally high demand for this type of property. The number of students in university is at an all time high and the demand for such properties is only set for further growth.
How Mistoria Group Can Help
If you are interested in the HMO rental market, come and speak to the experts in buy-to-let investment, Liverpool, Bolton and Salford based Mistoria Group. We can answer any questions you have. Contact us now on 0800 500 3015.