HMOs are one of the best ways to make money in property investment. They tend to have much higher yields than traditional buy to lets.
They also tend to cater more for a younger generation, a demographic which is being priced out of the property market. As a result, the demand for a good HMO is usually always there.
The downside is they take a lot of management, which is why a lot of HMO landlords are happy to do a rent to rent deal (especially if you get them at the right time, ie when they’re older and want a quieter life).
Becoming an HMO landlord often involves converting a traditional family home. But it could me more complicated, ie the conversion of a nursing home, former B&B, even an office complex. This means applying for planning permission and checking out whether or not there are any Article 4 directives running in the area.
Then, it’s a case of complying with a number of health and safety rules, as well as room sizes and other legislation unique to HMOs. Once this has been achieved you can apply for an HMO licence from the local council. You can then be subject to unannounced inspections from time to time. Part of the fire safety rules also involves ensuring there is a regular fire drill on the premises, and that this is recorded.
It is possible to get a management agency to run your HMO but you will have to pay them a fee to do this, which could be around 10% to 14%, depending on what you can negotiate.
Rent to rent HMO
When adopting a rent to rent HMO position, the initial conversion details, planning permission applications and licensing will all have been carried out by the landlord. Your task is the management and running of the HMO.
That means collecting the monthly rent, finding new tenants and making sure their references check out. You will then have to ensure they adhere to the rules of the house, carry out an inventory check for them (and again when they move out), issue them with a lease and lodge their deposit.
The financial rewards for carrying out a rent to rent HMO strategy aren’t as high as if you owned the HMO, because you’re still giving the landlord a minimal rent. But you will still make a profit and over time you can put this towards buying your own HMO. Certainly, by the time you can afford it, you’ll have built up an excellent wealth of experience.
Get in touch with Sourced
Regardless of whether you are looking for an HMO to buy or looking to start off with an HMO rent to rent strategy, here at Sourced we can help you succeed. Thanks to our peer to peer lending platform, we can also help you fund up to 100% of the purchase and refurb costs of your HMO project.
To find out more about what we can offer you in the field of HMO property investment, then get in touch with the team for a chat. First though, why not download our Sourced Franchise Prospectus to have a look through today?