Houses in multiple occupation (HMOs) is a term which refers to residential properties where ‘common areas’ exist and are shared by more than one household. Common areas may be as significant as bathrooms and kitchens / kitchenettes, but may also be just stairwells or landings. HMOs may be divided up into self-contained flats, bed-sitting rooms or simple lodgings.
Demand for HMOs
The demand for HMOs has increased gradually but is now at its peak, now without any doubt. This is because its more economic than renting a flat, HMOs obviously catch the attention of single tenants. A change in demographics in the UK has meant that more people are living alone and fewer people can afford to rent their own flats, so more are sharing, thus increasing demand for HMOs.
It is found that single people under 35 are only eligible for a room, which is also forcing people into HMOs. When comparing the average tenant from an HMO and the average tenant from a one bed flat, the HMO tenant could save £1608 more over the year. Moreover HMO agreements often include most utility bills with the rent which is even more appealing to potential tenants.
In addition, HMOs are perfect for university students. Typically students will spend their first year in halls of residence, but then for their 2nd, 3rd & possibly 4th years they may want to share a house with their friends. HMOs provide the perfect solution to this.
The Big Deal
With the simplest calculation you can realize the benefit of HMO investments. You can achieve a much higher rent for a given property than you would otherwise be able to be renting the property as a whole to a single family unit.
For instance, a 4 bedroom house might have a market rent of £1,000 when let to a single family. But if the same property were let as an HMO for £400 per room, the potential rent could be £1,600.
Buy-to-let investment is a more profitable sector to invest in than other fields of investment as it provides a stable income from rental receipts, as well as an accumulation of wealth if house prices go up over time. In particular the HMOs generate the highest profit in the buy-to-let business with a very low risk.
Though there are some additional responsibilities of a HMO landlord are general landlords, if you want to be a buy-to-let investor the HMOs is the best option for you.