HMO property investments are an important part of the UK housing market as they offer students and young professionals affordable accommodation. There is a growing demand for HMO student property across the UK and particularly in the North West, as the region offers excellent yields, high occupancy rates and good capital growth.
HMO investors receive a considerably higher return then standard BTL investors over the last five years – an average of 10-15% in comparison to 5- 8% applying a gross return to both. This is spite of the fact that the average initial capital investment in an HMO is higher than a standard BTL property.
However, every investor needs to be cautious and ensure they buy in the right street, as yields can vary dramatically by postcode. HMOs within walking distance of a University, or just a short bus or train journey away, will usually command the highest rents.
For high-yielding student property investments, check out our Student Property Investment page.
To help investors considering student HMO property, The Mistoria Group has put together some tips below:
Top Tips on Student HMO property investments
- Finding the right area: Rental yields are highest for top universities – Manchester, Salford, Liverpool, Bolton all offer excellent returns, over 12%. It is also worth considering Sunderland, Birmingham. Leeds, Sheffield, Nottingham and Leicester.
- Just go with it: You will never be ready and the longer you delay it, the harder it will become. You will also be missing out on some great deals. It is important to accept that much in this business is an act of faith and some questions are unanswerable.
- Council tax and licenses: Students are exempt from council tax – you will just need to prove that you are housing students. You must have a licence if you’re renting out a large HMO in England or Wales. Your property is defined as a large HMO if all of the following apply: it is rented to five or more people who form more than 1 household and some, or all of the tenants share a toilet, bathroom or kitchen facilities.
- Quality accommodation: To attract students you will need to offer a quality property featuring furniture such as beds, wardrobe, desk and chair, together with white goods throughout. Ensure that you provide enough seating for the tenants including sofas and dining chairs.
- Good quality photos and videos: Fisheye and wide-angle photos give the best results. Ensure you capture high quality, eye-catching images including any garden and outside spaces. It is important to include floor plans and clear descriptions of the property features. Consider virtual viewings – essential for times like this when some towns and cities are facing lockdowns.
- Marketing your property: Universities send out lists of approved HMOs, so it’s important that your property is included. You should also advertise your HMO across some property portals such as Rightmove, Zoopla, On the Market as well as the room websites such as Easy Room, Spare Room and One Dome.
- Effective viewing process: Ensure you can conduct viewings on weekends and in the evenings, along with virtual viewings. Make potential new tenants feel comfortable and safe.
- Tenancy agreements: You must provide HMO tenants with a joint and several liable tenancy agreement. The application and reference process should be user friendly and online – ideal for international students that can apply face-to-face.
- All-inclusive bills: Give tenants the option to provide gas, broadband, water and TV license. Most students struggle to get their bills under their name and so it makes sense for the landlord to control the utilities and ensure bills are paid on time.
- Inventories: As it is a house share, there will be more wear and tear. It is better to have an inventory done by a specialist third party at the beginning and end of the tenancy. This will enable the landlord or agent to make deductions from the deposit to cover any property damage.
- Quarterly property inspections: Regular inspections are essential to ensure the property is well maintained. This will also help to ensure the property is ready for the next tenants.
- Empty rooms: Rather than focusing on occupancy and earned income, plan your finances around empty rooms and loss of income. This will protect you from losses in your portfolio.
- Enjoy being a student landlord: Most importantly, enjoy what you are doing. Take a leap and just go for it.