Why I invest in HMOs

Here's the latest edition of The Business Owners' Property News and in this edition we look at why investing in HMOs is our main strategy at Brahma Property...

Investing in Houses in Multiple Occupation (HMOs) in the UK can be a strategic choice for property investors. HMOs are properties where three or more unrelated individuals share common facilities like a kitchen or bathroom.

Here are several reasons why investors might choose to invest in HMOs in the UK:

1. Higher Rental Yields:HMOs often generate higher rental yields compared to traditional buy-to-let properties. With multiple tenants paying individual rents, the overall rental income can be significantly higher, making HMOs an attractive option for investors seeking strong cash flow.
2. Diversification of Income Streams:Having multiple tenants in an HMO diversifies your income streams. Even if one tenant leaves, the impact on your overall income is less significant compared to a single tenancy property.
3. Market Demand:There is a growing demand for shared accommodation in many urban areas and university towns. Students, young professionals, and individuals looking for affordable housing options often prefer HMOs due to their cost-effective "all bills inclusive" rents.?The option to have shared living with other similar people creates co living communities.
4. Adaptability to Market Trends:HMOs can be adapted to changing market trends. For example, if the demand for family homes decreases, HMOs can cater to the increasing demand for smaller, more affordable living spaces.
5. Flexible Rental Agreements:HMOs often allow for more flexible rental agreements, such as shorter agreements or room-by-room rentals. This flexibility can attract a diverse range of tenants, including students, young professionals, and individuals on short-term assignments.
6. Maximizing Property Utilisation:HMOs maximize the utilisation of space within a property. By converting a house into multiple rooms for individual tenants, investors can increase the overall rental income potential of the property.
7. Reduced Vacancy Risk:With multiple tenants, the risk of complete vacancy is lower. Even if one tenant leaves, the other rooms continue to generate income, reducing the impact of potential void periods.
8. Regulatory Changes:Recent changes in the UK housing market, including increased interest rates have made traditional buy-to-let properties less profitable - and this has led some investors to explore HMOs as an alternative investment strategy. While HMOs also have more regulations, they can offer a different risk and return profile.
9. Potential for Value Appreciation:Well-maintained and strategically located HMOs have the potential for value appreciation. As demand for shared housing increases, the market value of HMOs in desirable locations may rise.Commercial valuations may also be available for HMOs particularly for larger HMOs in Article 4 areas which require planning permission for developing HMOs, raising barriers to entry into the HMO market.
10. Opportunities for Property Management:Some property investors enjoy the hands-on approach to property management that comes with HMOs. It allows for more direct involvement in the day-to-day operations and tenant relations.I've always found it very rewarding to create safe, secure and high quality accommodation for my tenants - and they appreciate the amenities and service we provide.

It's important to note that investing in HMOs comes with its own set of challenges, including regulatory requirements, property management considerations and potential higher maintenance costs.?

Investors should thoroughly research the local market, understand regulations, and consider working with experienced professionals to navigate the complexities of HMO investments successfully.

As experienced HMO investors, developers and property managers we are always happy to guide new investors in their HMO business and it is a large part of our 12 month property programme - get in touch to find out more!