Is it worth investing in HMOs? HMOs, or ‘Houses in Multiple Occupation’, have certainly increased in popularity over recent years, and it would seem that more people than ever are looking into investing in them as the UK property market continues to perform above expectations.
For UK property investment, buy-to-let in particular, the market has over-performed expectations for a few years now which is surprising considering that many were convinced that the drop in demand due to the pandemic may cool things off.
However, the opposite occurred, and instead we have had two years of price rises in double figures or above, with demand for high quality rental accommodation going through the roof as more people than ever look to expand their space or move into new surroundings.
One of the questions we get asked on a fairly regular basis is whether HMOs are worth investing in?
Whilst it’s true that HMO investment can be and are very lucrative when done the right way, it’s not quite as straight forward as you’d assume from the viral videos that do the rounds on newspaper websites about millionaire 21 year olds building their property portfolios.
Investing in HMOs
In terms of availability, HMO investments aren’t as widely available to investors as buy-to-let investments. Most HMOs are bought via specialist agents like yieldit, mainly because sellers prefer to use specialists who are experienced at dealing with tenanted properties, but also because our investment clients value the advice and guidance we’re able to provide.
In our experience we have had a few experienced HMO investors buy existing large properties and look to develop them. However, in order to do that you will almost certainly require financing or some kind of mortgage or loan to be able to pay for the work (unless you’ve got a good amount of cash on hand). For those looking to purchase their first HMO, it could be very hard to qualify for good interest rates and lenders tend to be quite niche, and if you haven’t any experience beforehand this can be even harder.
It is also important to note that the licence process for being a HMO landlord can be fairly strict, and they aren’t always easy to obtain as a first time investor on a brand new property. This is where buying through a specialist like ourselves can be beneficial, as we can guide you through the process.
Overall, HMO investment is more of a specialist pursuit, however, when you use a specialist agent this becomes a much easier journey and the advice you receive will be invaluable. HMOs can offer an extremely lucrative return relative to your initial investment and the yields can be crazy so, yes, it’s certainly worth considering investing in HMOs.
If you’re looking to purchase a HMO, why not get in touch with our team of buy-to-let specialists here?
