It is no hidden thing that the demand for houses of multiple occupancy (HMOs), increased rapidly in the last few years. Therefore, it grabbed the attention of many investors who want great rental yield at minimum cost. If planned and managed carefully, HMOs can work wonderfully for some investors. While for others, it is a long list of legal obligations.
Whether you are planning to invest in an HMO property or a Landlord looking to expand the revenue, you need to know what HMO is and what benefits and pitfalls it offers. We will briefly introduce you to HMO in case you are new to this term opens HMO Property Designs:
What is an HMO?
Houses in multiple occupation or houses of multiple occupancy are legal terms used for property where three or more tenants live together. These tenants share the same household though they are not family members.
Each tenant has a separate bedroom; some may include an en suite, depending on the apartment’s rent. All tenants have some sharer facilities like communal sitting, kitchen, or bathroom. Now let’s weigh the benefits and pitfalls of investing in an HMO property.
Pros OF Investing In An HMO
With increased property demand, this type of household is trending among the tenants as well as investors. Here are some pros:
- Unparalleled Financial Benefits: With fluctuated rental prices, HMOs offer a constant flow of money, i.e., it has more rental yields than single-let properties. Moreover, the cash flow is regular even in an uncertain situation like a global pandemic.
- Tax Break: If you need to get some property improvement changes, e.g., extension or maintenance, it will come in the revenue cost category, which is tax-deductible.
- Increased Demand: With the increased population, the demand for private rental properties is growing significantly. Therefore, in 2021, you should not miss the opportunity of investing in an HMO.
- Lesser Rental Arrears: In HMOs, you never run out of rent. If, due to some reason, one tenant falls behind to pay the rent, you can still get the rent from others.
- Lower Rental Voids: Your apartment won’t stay empty if one tenant is moving out; there are still tenants paying you rent. So there are no or lesser void periods.
Cons OF Investing In An HMO
Not everything is bright in this picture; here are some pitfalls of investing in an HMO:
- More Responsibility: As compared to single-let properties, there is more responsibility on the Landlord in HMOs. They have to pay the utility bills themselves, even if some tenants are paying the rent late.
- Scarce Letting Agents: Managing an HMO property alone is a difficult job. Therefore, you need a good professional agent for this purpose, which can be difficult to find. But with new companies like HMO Property Designs, you can gain an edge over other investors. But still, it will increase the managing cost.
- Low Capital Growth: Compared to single-let properties, HMOs have limited capital growth, making them difficult to sell.
- More Legislation Requirement: It is not as straightforward as single-let property; there are many government and local council legal requirements to abide by.
- Requires More Planning: As starting this project is expensive, you have to make a proper plan that can work out. Talk to local HMO officers and analyze the demographics before making purchase calls.
You need to be mindful of all aspects of HMOs before investing in this big project. As per our experience, though it requires some hard work, the results and revenues are worth the effort.