Houses of Multiple Occupancy or HMOs are increasingly becoming a popular option for property development. HMOs refer to properties that are rented out to multiple tenants, with each tenant typically having their own bedroom but sharing common areas such as the kitchen, bathroom and living spaces. HMOs can be a lucrative investment option for property developers, but there are a few things they need to know before venturing into this type of investment.
Firstly, HMOs offer a higher rental yield compared to traditional buy-to-let properties. Due to the multiple tenants occupying the property, the rental income generated is often higher than what a landlord could make from letting the property to a single tenant. This can make HMOs an attractive option for experienced landlords looking to increase their rental income.
Secondly, HMOs come with additional regulations and requirements. In order to comply with HMO regulations, property developers will need to ensure that the property meets minimum safety standards, has adequate space for each tenant, and meets planning permission requirements. Failure to comply with HMO regulations can result in hefty fines, which can drastically reduce the profitability of the investment.
Thirdly, HMOs can require a higher upfront investment. Unlike traditional buy-to-let properties, HMOs often require more extensive renovations and conversions to create individual rental units within the property. This can lead to higher upfront costs for property developers, which can be a barrier to entry for those with limited financial resources.
Fourthly, HMOs require more management and maintenance. With multiple tenants occupying the property, property developers will need to ensure that the property is well-maintained and that each tenant’s needs are met. This can require more management and maintenance work than a traditional buy-to-let property would.
Despite the challenges, HMOs can be a profitable investment option for property developers who are willing to put in the work. By purchasing an existing HMO property or converting a traditional property into an HMO, developers can generate steady rental income and increase their overall return on investment. However, it is important to do thorough research and due diligence before investing in an HMO property, to ensure that it meets HMO regulations and that the property is in a desirable location with high rental demand.
HMOs can be a lucrative investment option for those willing to take on the additional regulations, upfront costs, and management requirements. If done well, property developers can generate higher rental yields and increase overall return on investment. However, it is important to research and understand the nuances of HMO investments before diving in, to ensure a successful and profitable investment.
We will have a number of experts on hand to talk through HMO options for you at the Property Investor Show at our Free seminar and debate programme including
Managing Shared Houses – Richard Blanco NRLA – Friday 21 April at 10.50 am
HMO’s and Council Tax Panel – How Landlords can win the fight – Friday 21 April at 4.15 pm
- Daryn BrewerFounder and Managing Director | Pro Pods –
- Wendy Whittaker-Large Founder | Best Nest & HMO Success
- Matt Baker
- Alan Murdie
Property Investor Show 21/21 April London ExCel