HMO investments: Are they worth it?
Houses in multiple occupations (HMOs) are a popular investment choice for landlords.
HMOs can offer a steady income from month to month. Properties don’t often stand vacant because individual tenants and households have their own contracts, and they are unlikely to all move out together. They also reduce the risk of rental arrears because it is unlikely that all tenants would ordinarily fall behind on payments at the same time.
Whether a landlord is letting to students or multiple people, HMOs also tend to offer a higher yield when compared to other property types. Recent analysis from a UK lender has shown that HMO investment properties offer average yields of approximately 7.5%, compared with an average yield of 5.4%.
There are two key things to consider before investing in an HMO. Firstly, if purchasing with a mortgage, you are likely to require a specialist lender. Secondly, not every location is suited to an HMO investment – it is important to establish local demand as well as local competition.
Most importantly, are the regulations surrounding HMOs occupied either by five or more people or by two or more households. Investors require a mandatory licence, the cost of which varies between councils and usually ranges from £500 to £1,000 per property.
If you are thinking of investing in a HMO, get in touch and talk to our team of experts.