The HMO backdrop
With so many first time buyers effectively priced out of the housing market it may come as no surprise that many working professionals are instead now opting to rent an ‘all inclusive’ room via HMO letting agents within a shared house as their first rung on the property ladder. Gone are the days of the typical house share where shabby bedsits were provided by the likes of 1970’s sitcom ‘Rising Damp’. The market has moved on. Instead, savvy landlords now fill the gap that is seen as the most lucrative form of property investment there is by letting larger houses on a ‘room by room’ basis inclusive of all manner of services including gas, electricity, water, superfast Wi-Fi, Sky TV, dry cleaning collections (London only!) and communal cleaners.
Investing for success in the HMO market
Make no mistake – get it right and HMO’s can make very good businesses sense indeed. They are often the only route to ensuring your original mortgage debt can be paid down at the same time as generating very strong monthly profits. To achieve this ‘holy grail’ the most successful HMO landlords we come across as letting agents in Nottingham ensure their properties are fully occupied and importantly most of the time. To put HMO’s into some context, a standard 3 bedroom Buy to Let property let to a single household in Nottingham will generate between 3 – 4% net yield (average £100pcm net profit). Compare this with a ‘standard’ 6 bedroom HMO let via HMO letting agents and we would expect a healthy 6-7% net yield (average £1100pcm net profit). The returns for landlords can be significant depending on the location of the property.
Rental agencies and the HMO model in practice
However, utter the words ‘House in multiple occupation’, ‘HIMO’ or ‘HMO’ to letting agencies in Nottingham and you’ll find most run for the hills. Put simply, most property management companies don’t consider HMO’s to be good business. The reason for this is two-fold. Firstly, agents have always struggled with HMO regulations and the importance these place on a rental agent in terms of their on-going responsibilities. Secondly, HMO’s are considered to hold greater levels of maintenance not only from a wear and tear point of view but also from managing tenant expectations. Put six people together in a shared house and there are always going to be the odd disagreement from sharers ranging from some tenants not cleaning the kitchen after their use to trying to work out why one tenant insists on playing their music until 2am! If you are considering getting involved in HMO’s be sure to use the services of ARLA regulated letting agencies in Nottingham that have detailed knowledge of HMO regulations.
From our experience most letting agents like a quiet life and the very thought of managing HMO’s often results in them breaking out in a cold sweat. But not us – as HMO letting agents we relish the prospect.
Thinking of investing in the HMO model? Feel free to call our office today on 0115 981 9651 to find out how we could help get you off to a flying start.
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