The benefits of investing in a HMO
There are many benefits to property investors looking at HMOs (houses of multiple occupancy). Sure it can be demanding and time-consuming but all efforts are eventually rewarded which could lead you to a life of financial freedom.
HMOs are a huge growth market. The housing crisis in the UK is affecting many people and the government is actively promoting communal living as a way for people to find and afford somewhere to live. Recent changes to Housing Benefit rules mean that single people under 35 are only entitled to a room in a shared house. This has pushed thousands of people into the HMO market, looking for a cost-effective solution to their housing needs and this includes people from different backgrounds including those on benefits and highly paid professionals, but in general, these individuals want quality shared housing.
Shared accommodation has definitely become an acceptable way to live, but tenants will not settle for lacklustre standards. The demand out there is huge for anyone with a high-quality HMO.
For investors, HMOs can generate a high yield, the return on investment is a lot higher in comparison to single occupancy properties, it is not uncommon to see returns from 8-20% (compared to a maximum of 5% for single lets). The cash-flow for HMO’s is also more rewarding, with less impactful void periods as you will not be reliant on one tenant to pay their rent.
There’s a popular misconception that multiple occupants can increase the risk of late payments but put into perspective, even if there’s one problem tenant you know you can still cover your mortgage and bills from the remaining rental income, spreading the risk.