House in multiple occupations, commonly known as HMO, is a property rented to 3 or more people who are not part of the same household – 2 or more households who share communal areas such as kitchen or bathroom.
Many landlords consider HMO as a more efficient way to have a rental portfolio. The opportunity of accumulating more rent from several tenants and having a prospective higher rental yield is enticing.
If you are considering creating an HMO (house in multiple occupants) here are the 5 tips you may want to consider.
1. Consider your target market
If you are considering to let your property to professionals or to students. Some landlords prefer to let their HMOs to professionals while others prefer students.
Letting your property to students can be a great option for you as a landlord. The demand for student areas can be strong and often tends to offer high yields. Although the property tends to suffer more wear and tear. Usually, students prefer fully furnished properties.
On the other hand, letting your property to professionals is also a great option for you as a landlord. Split type of properties are the best suitable for professionals. Appearance matters for young professionals.
Choosing the right target market is critical.
2. Location
When creating an HMO, you must consider the location. When choosing a location, you would want to focus on an area that is near to amenities or public transports. Many tenants would prefer areas that are surrounded by amenities and close to public transport. Usually, a lot of tenants rely on public transport to go to work.
Look for areas that you think your target market would want to live in. For example, if your target market is students, you would look for a property close to universities or to areas with good transport links.
3. Check the rental yields
Before investing or creating an HMO, run the figures. Speak to local letting agents to see how much rent you can expect to earn from a property.
Usually, a 12% and above should be an enjoyable rental yield. In order to check this, take the total yearly expected gross income and divide it by the purchase cost and refurb cost.
4. Do not mix the types of HMO tenants
If your target market is students, do not mix them with young professionals. Mixing tenant types will usually cause disagreements. You would want to create an environment to make your tenants stay longer.
For instance, young professionals work 9-5, they won't usually want to share a house with a student who would stay all night. Focus on your target market and make sure to rent the property to people with the same lifestyle.
5. Hire a cleaner
While the task in keeping the communal areas tidy and clean is for the HMO tenants - kitchen, bathroom, living room, and corridors. Usually, tenants in HMO do not take responsibility for these areas and can create dissatisfaction. In the end, it is the landlord’s responsibility to keep the communal areas well-maintained.
It is a good idea to hire a cleaner once a week. Remember that cleaning services are tax-deductible.
BLUESTONE PROPERTIES
Bluestone Properties is a property management and letting agency in south London. We provide services in south London and surrounding areas. Get it touch with us by calling us on 0208 355 3405 and we’ll help you take out the stress of the process in buying a home or selling your home.
