Now that property investment is firmly on-trend, HMO management is becoming a more common occupation; it’s estimated that currently over 4.5 million Brits live in a HMO! Hence why for landlords they’re highly profitable.
Look at where HMOs are situated in the UK and you’ll soon realise they’re more than likely in a place where rental yields are high (useful tip). In plain English that’s somewhere where the purchase price is low in comparison to the average rent. Reason being that unlike a residential let, HMOs can be let out to more than one person. However, that’s not to say you should just invest everything you’ve got into a HMO – there’s other factors to consider too, like the cost of a HMO license and the workings of HMO management
So with this in mind, here’s a whistle-stop tour of the management that goes into owning a HMO property…
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A HMO is a property which is rented out to 3 or more people from at least two households. Living a HMO means you’ll share a bathroom and kitchen, but have your own separate room. Some examples of HMOs are: student accommodation, bedsits, hostels, some B&Bs, residential care homes and houses that are let to lodgers.
HMO is an acronym which means House of Multiple Occupation, however sometimes a HMO is also known as a house share.
A HMO license is a legal requirement of any landlord renting one here in the UK. Licenses are sought through your local council and usually cost around £500 – £600, but ultimately the cost can differ quite substantially. In fact HMO licenses are often described as a ‘postcode lottery’. Licenses in London can often exceed £1000. You usually require a license when…
NOTE: HMO’s let to 5 or more people are considered to a ‘large HMO’. Opt for a smaller HMO and you may not have to foot this fee. All HMOs that apply will be subject to a HMO inspection by a representative of the local council. If your HMO rental is not deemed to be up to the required standard, you can be ordered to make changes before anyone moves in.
Something you should know before investing in a HMO rental, is the amount of regulations your property must adhere to before it can be rented out.
Here’s just a handful of HMO regulations for you to be aware of:
NOTE: HMO regulations aren’t there to trip you up. In fact most are common sense. The reason they’re there is to ensure the tenant isn’t being mis sold and at the very least has adequate living standards.
Renting a HMO isn’t as straight forward as you’d think. Before even buying the property and doing the necessary renovations, you first need to consider who you’ll be renting it to. By that we mean, are they young professionals? AirBNBers? Students?
You see, if they’re young professionals or AirBNBers, they’ll likely just want one or two rooms. Either way it’s unlikely it’ll be the whole house. Whereas if your target demographic is students, then they’re most likely to want most of, if not all the house, as they tend to live together in friendship groups. So with this in mind, how should you rent your HMO? Here’s just some of the advantages and disadvantages for you to consider…
TIP: Don’t overcrowd a HMO rental otherwise you could also be breaking the law. The minimum room size for a HMO is at least 6.51 square meters. Fail to adhere to this when doing your renovations and you could be denied a HMO license by the council full stop. A costly mistake.
How profitable a HMO rental could be, is actually pretty difficult to say, as it’s hinged on not only how you use it, but also external factors too. For instance:
But saying that, most HMOs if managed properly can return a solid rental yield and prove to be profitable in the short term as well as the long run. So this beggars the question…
Ultimately, whether you choose professional HMO management or not depends on the size and type of your portfolio. In the case you have a couple of HMO properties as long term lets then it’s likely you get away with managing them yourself. It’s when you rent by room that management can become tricky.
Juggling maintenance with inspections as well as the coming and going of tenants, can prove to be a challenge, particularly from a logistics point of view. The more frequent your tenant turnover, the more complex this all becomes.
Let’s face it, coordinating viewings around X amount of other tenants isn’t as easy as it sounds. As is trying to inspect your property without infringing your tenants’ privacy, when each one of them is on a different schedule. A set of complications you can do without when managing a hefty portfolio. For these reasons it’s often said that HMOs are the hardest residential property investment to manage, so if you’re after a more hands off approach then investing in professional HMO management could be a wise move.
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