What is an HMO and why buy one?
A house of multiple occupants (HMO) is a type of housing where multiple unrelated individuals share common living spaces and facilities, such as bathrooms and kitchens. The term is most commonly used in the UK and other parts of Europe to refer to houses or apartment buildings that are rented out to multiple tenants.
In the UK HMOs are legally defined as a property occupied by 3 or more people who form more than one household and they share an amenity like bathroom, kitchen or toilet.
In some cases, HMOs are owned and managed by landlords, who rent out individual rooms to tenants.
Alternatively, HMOs can be owned and managed by tenants themselves, who collectively take on the responsibilities of maintaining the property and managing the community.
HMOs can be a cost-effective housing option for people, particularly students or young professionals, who are looking to rent in a specific area but are unable to afford their own place. However, due to the nature of shared living spaces and facilities, living in an HMO can also come with some challenges, such as noise and privacy concerns, and difficulties in coordinating the schedules and needs of multiple tenants.
Depending on the local regulations, HMOs can have specific bylaws that owners need to follow, also in terms of fire safety, health and sanitation, and rental permits. In some cases, local councils have introduced Article 4 to limited the amount of HMOs within the area, and some cases adding a premium to HMOs within Article 4 areas.
The Benefits Investing in HMOs
Investing in HMOs can have several potential benefits as an investment strategy. Here are a few reasons why:
- High demand: Multi-unit properties can be in high demand, as they can provide affordable housing options for renters looking to share living expenses.
- Potential for higher returns: Multi-unit properties can generate higher returns than single-family homes, as the income from multiple units can offset the costs of maintenance and repairs.
- Diversification: Investing in multi-unit properties can provide diversification in an investment portfolio, as it can help spread risk across multiple tenants and units.
- Tax benefits: Owning a multi-unit property can provide potential tax benefits, such as depreciation and the ability to deduct expenses related to the property.
- Management: Managing multi-unit properties can be less demanding than managing a single-family home, as the property manager can handle most of the tasks such as rent collection, tenant issues, and maintenance.
However, investing in HMOs can also come with certain challenges, such as the need for significant capital and the need to manage and maintain the property effectively.
Types of HMOs to Invest
Besides your typical 4-bed terrace in Greater Manchester, HMOs come in all shapes and sizes. Here at The Property Advantage, we sell different types of investment opportunities, below is an overview of those investment opportunities.
We broker almost every type of HMO available, from small 4-bed opportunities, medium-sized boutique HMOs with full en-suite facilities, to student HMOs and to HMOs upwards of 25 bedrooms. All of our HMOs are valued with consideration to local yield expectations, condition, occupancy and tenant demographic – with a key focus on running costs and net income.
We regularly broker newly converted or developed blocks of self-contained studios or apartments. These can range from 4 – 100+ units, and we work with a great client base of developers and property traders who provide us with their upcoming blocks exclusively for our investor bank.
Since 2021, we have seen a steady increase in the number of portfolios we are getting asked to sell. These range from 4 – 50+ units and can comprise HMOs, BTLs or mixed property types.
We have been building our network in the ‘care sector’ over the last 18 months and this has enabled us to offer many properties to our investors that have benefited secure long-leases, usually with charities providing local housing needs. For more information about buying properties with long leases, please contact our office.
Add-Value / Developers
As we work with developers and landlords, we are regularly asked to broker properties which have the buzzword ‘add value’. These can be commercial to residential conversions, tired rental stock, reduced priced properties or projects which haven’t got off the ground due to the current owners’ circumstances.
Freehold mixed-use buildings across the country have proved very popular with our buyers recently with demand for sites that provide multiple income streams from different tenant types.
For more about HMO investing, you can get in touch with our experienced team on 01743 612 018 or email us at email@example.com.