With many professionals choosing shared living as a social way to live, more students going to university and costs for rental properties rising, it’s no surprise that many young people prefer House of Multiple Occupancy (HMO) accommodation.
In the case of students, it provides more independence than living in a Halls of Residence and allows them to live with friends. For young couples and professional singletons, the lower cost of a HMO rental makes saving for their own property easier.
And as for you, as a property investor, well we have listed our top 5 reasons why HMOs are the right investment choice.
1. Higher yields
Yields for HMOs are twice and often three times better than those of a traditional Buy to Let (BTL) property. It’s not unusual to have a 10% to 14% yield with an HMO. In fact, it’s worth noting that six HMOs could get you the same return as around 30 BTLs.
Having lots of tenants paying rent i.e five or six individuals instead of just one or two people means that void periods are far less likely. With a BTL, if the individual or couple moves out, you have no income coming in. However, with an HMO, you should always have some income from your property.
3. More tax reductions
There are more expenses you can write off in an HMO than a BTL property. You can, for instance, claim for plumbing systems, electrics, lighting and lifts in communal areas e.g. corridors, hallways and basements etc. as a capital allowance, if you are converting the property. Did you also know that you can claim against the utility bill, broadband and council tax of the HMO as part of your business expenses?
4. Increasing demand
A recent report by the National Housing Federation showed that to meet current housing demand, the UK needs to build an extra 340,000 new homes every year. In the meantime, people will keep renting.
The English Housing Survey, back in 2017 showed that the private rental market had doubled in size since 2004. Around 50% of renters are aged between 25 and 34. This is the age group that typically rents HMO accommodation.
5. Time is right
Admittedly, things have been a little strange of late, to say the least. However, despite the pandemic and its numerous lockdowns, the UK property market has flourished.
A 1% increase in house prices is forecast for later this year and unemployment is expected to increase when the furlough scheme ends. But that doesn’t mean the private rental sector will be hit, rather quite the opposite. Our HMO specialists predict a sharp increase in the number of professionals living in a HMO and banks to provide 5% and 10% deposits for 1st-time buyers. So if you are thinking to invest in property, now is the time to do so.
How we can help
If you’d like to more about our predictions for the UK HMO property market, do get in touch and our HMO experts will help you make the right decision based on your financial goals. At Sourced Franchise, we will help you build, grow and manage your HMO portfolio and generate a passive income with returns up to 30% on your investment! To find out how Sourced Franchise can help you generate an income from HMOs, download your copy of our Sourced Network prospectus.