If you intend to join the many property investors currently making great returns from their HMO properties, you first need to make sure you find the ideal property.
While this sounds simple, there are actually several factors to consider when looking for HMO properties for sale. Are they in the right kind of location? Are there tenants that will want them? What’s the competition like? Is the property ready to be let as an HMO, or is there reconfiguration work to be done?
Investing in HMO properties is a great way to make a reliable income if you get it right with the location and type of property. You also need to understand all of the regulations that come with this form of property ownership, how to ensure you’re meeting all the legal requirements and consider how much time you want to allocate to its ongoing management.
Finding the right kind of HMO properties for sale
When searching for HMO properties for sale, the first thing to consider is your budget. If you are an experienced property investor looking to add HMO properties to your existing portfolio, you’ll likely have different considerations to a newcomer who wants to find one ideal HMO for sale.
Buying property in more expensive areas, such as London and the Southeast, will automatically eat up a lot of capital upfront. However, if you intend to self-manage the HMO, then you must be nearby.
Ongoing management costs do add up, and it’s impossible to fulfil the legal obligations of renting out an HMO property if you don’t live in the locality. The other option, of course, is to use a property management firm, which then frees you up as an investor to buy an HMO property in the region that will bring you the best returns.
Remember that a standard letting agent won’t necessarily have the experience or expertise to manage the HMO on your behalf. As this can leave you liable to fines and regulatory costs, it’s best only to use an HMO specialist.
How do locations differ when looking for HMO property for sale?
Before we go into what makes HMO Property Designs different and why it’s so much simpler to find HMO properties for sale through us, here are some stats on UK locations.
These are based on data pulled during summer 2020 from Rightmove, the Office of National Statistics, Zoopla and Government sources.
- The most expensive cities in the UK to buy terraced properties suitable for HMOs are Oxford (£477k), and Bath (401k).
- Manchester has had impressive capital growth since 2016 at more than 10%, followed by Leeds at 8.1% and Warrington at 4.29%.
- London offers the worst ROI and least value for money for getting the most rental versus the price of the property.
- Manchester has the highest number of rooms available in HMOs on the market with 1806.
- The highest demand for rooms from tenants is in the North West.
- Rents are highest in Cambridge at £620 per month, while the cheapest rooms in the country for tenants are found in Hull and Aberdeen.
Look to the past and the future to figure out the ideal HMO location.
In terms of average rental income per room, the highest is in London. But as the property price is also the highest, this isn’t a great investment decision. In the North West, on the other hand, rooms in HMO properties command more than £468 per month on average.
Finding the right HMO property for sale is key, as is ensuring you can command a good level of income from renting the rooms. It’s a good idea to look back at which areas have improved over recent years to figure out their likely trajectory for the future.
Since the 2008 property crash and subsequent recession, property prices have been slowly recovering. Prices have risen even more since the start of the pandemic, with experts suggesting people now want more space and to expand their living area to deal with lockdowns.
Whether that will lead to a property price crash is yet to be seen, but it’s worth considering that the likes of Lancaster, Stoke-on-Trent, Preston, and Huddersfield have all experienced impressive growth in house prices. On the other hand, London has stayed pretty flat since the twin impact of Brexit and COVID-19.
The HMO property for sale must fulfill legal criteria.
Ensure that the properties you’re searching for fit the legal criteria for an HMO. An HMO property is defined by the Housing Act of 2014 as a residential property occupied by tenants who are not part of one single household. They must share amenities and facilities to qualify. Check out the UK Government website for more information.
As the landlord, you will be providing multiple tenancy agreements and receiving rental income from each of them. It’s not possible to circumvent the HMO regulations by renting a house to a group of friends through one tenancy agreement – under the law; this will still be considered an HMO.
A major decision you need to make when looking for an HMO property for sale is whether you want to go ahead with an existing HMO or change a previously single-let property into an HMO.
Doing plenty of research is necessary, particularly if you’re not going with a specialist like HMO Property Designs.
You’ll need to:
- Speak to the local HMO Officer in the area that you’re considering buying a property in. They regulate and enforce all of the correct legalities and may have introduced their own separate licensing into their local authority area. This could mean that there are restrictions in place other than the standard ones.
- Find the perfect location to search for an HMO property for sale. Consider whether you want to let it to students or professionals and figure out where best serves your needs.
- Work out where will give you the best yields – remember that you ideally need low property prices and a high yield.
- Find out how in demand HMOs are from tenants in the area.
- What the demographic largely consists of – students or professionals etc.
- Check out plans for transportation changes, too, as yields can change based on the region’s planned general investment.
Is the property already an HMO, or will you need to manage reconfiguration?
When you have narrowed down the location, you need to figure out which kind of property you’re looking for. When searching for HMO properties for sale, there are several options.
Theoretically, any property type that has more than two bedrooms could work as an HMO. However, if you’re considering converting a previously one household property into an HMO, then you can expect a lot of work ahead.
In general, you’re restricted to an extent due to your budget. Searching for an HMO property for sale within your affordability range can automatically narrow down your options.
Look for an HMO property for sale that has the potential for you to maximise the use of the rooms to rent out. But always remember that the market is growing all the time, and there is competition out there. Your chosen property must be of a very high standard to have an edge on other HMO property investors.
Whether professional or student, tenants have high expectations from their HMO, and it’s perfectly possible to lose out on good income by not differentiating your property from the standard.
Before you decide to buy an HMO property for sale, ensure you understand all of the necessary licences, regulations, and obligations you have. There are rules governing the room sizes, waste disposal, and the minimum legal size for kitchens, bathrooms, and communal areas.
Other considerations depending on the kind of tenant you want to attract include how near the property is to university campuses, what the public transport links are like, whether it’s in a generally safe area and whether there is outside space. As the landlord/investor, it is your responsibility to make sure that the HMO you manage doesn’t cause any problem in the neighbourhood.
How working with the right professional firm makes it a whole lot easier.
There are great opportunities for HMO investors in the UK. But as you can see, seeking out the right kind of HMO property for sale, ensuring it meets regulations and managing it on an ongoing basis is a lot of work.
Our strategies at HMO Property Designs are ideal for investors who want to maximise returns through the HMO investment model without spending all of the time and money on all of the above.
Our investment models are the product of many collective years of experience in this space. The team at HMO Property Designs understand the challenges associated with investing in these types of properties and how to ensure you get the most out of your outlay from day one.
We’ve put together a collection of carefully sourced properties based in the Northwest by finding the properties ourselves. They are selected for their low initial outlay, the dependable yields they’ll bring, their proximity to key universities and city centres and their adaptability into HMO configurations.
We’ve already considered all of the work that investors must do before finding the ideal HMO property and done it for you. There is also the option of ongoing property management so you can start making money from a going concern straight away.