HMOs: multiples can be magic

Posted on 21 Feb, 2020

Forget the unwholesome reputation of student digs, Houses in Multiple Occupation (HMOs) are leading the way when it comes to rental yields.

Current HMO returns are so attractive that even uninitiated property investors are making serious plans to add a house share to their portfolio. In fact, research by Paragon released in January 2020 indicates HMOs are destined to become the most sought-after property investment type over the next 12 months.

The company’s Q4 2019 report measured landlords’ growing interest in HMOs, with 31% of those questioned saying house shares were the type of property they wanted to buy most – up from just 12% in Q3 of the same year.

Yields from HMOs explain the trend in one fell swoop, with the Paragon research also showing that HMOs achieve 6.5%, compared to an average yield across all property types of 5.6%.

What is a HMO?

A HMO is defined as a building, or part of a building, where at least three tenants live, forming more than one household (a household is defined by the Government as either a single person or members of the same family who live together). A large HMO is classed as a property where at least five tenants live, forming more than one household. All HMOs have shared basic amenities in common, such as a communal kitchen or shared bathroom.

A HMO doesn’t have to be filled with students. Professional house shares are growing in popularity, often with the landlord providing cleaning and laundry services to appeal to busy workers.

Extra work for the extra yield?

Possibly, depending on the management strategy employed. HMOs have been shunned in the past due to the extra maintenance often required and potential for a high turnover of tenants. Today, however, there is a network of support services and products designed to make light working of running a HMO. Viewber is part of that infrastructure, providing a property visit and viewings service ideal for the increased flow of tenants and trades that HMO landlords may experience.

Compliance comes first

Landlords may need a license to operate a HMO - some of these are discretionary while others are mandatory, linked to the number of tenants and even the height of the property. In addition, there are additional legal requirements and regulations attached to a house share, over and above those for a sole occupancy let.

A good letting agent with a property management division can look after all the legal, licensing and compliance aspects of a HMO on a landlord’s behalf, making this type of investment a real ‘hands off’ option, even for the HMO novice.

Otherwise companies like HMO Services London do what they say on the tin and can help save fines and/or hassle down the line.

If you already have a HMO or are thinking of expanding in the house share area, speak to Viewber. We can assist with check ins, condition reports, inspections, check outs, inventories and marketing assets, including photography and virtual tours.

 

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