HMOs and Students
HMOs and Students
In our consulting work with private landlords we always urge extra caution for those people who want to enter the student market. You have to be pretty careful and know what you are doing.
Probably the most important thing is to know how to look out for the risk that your market could be hit by the likes of a Unite or some big institutional investor setting up in the locale and gobbling up a huge chunk of your market.
Of course, they may well not be competing directly with you for student lets. They will probably be supplying a soul-less me-too flat, whereas you will probably have a freehold multi-let house, but all the same, they will still soak up a lot of the available student market.
And with the rumour being that the Conservative government are just dying to throw even more taxpayer incentives to the big institutional build to rent investors, this risk will not go away in the future.
Of course, students are often housed in houses in multiple occupation* (HMOs) under the management and ownership of a private buy to let landlord. And the shared living experience is something the students often enjoy. (*Note: An HMO is defined as a house with at least three adults sharing, at least two of whom are not related. Depending on the area, they may need to be licensed and are subject to more rules and regulations than normal residential lettings).
In recent years, there has been an increasing trend for other people, especially young professionals, to also live in shared houses. These days, this shared accommodation is often of very high quality. Of course, this big and growing professional sharers market is also partly in the sights of the big institutional company build to rent brigade too. But if there is enough demand – and there is in many big cities – the private buy to let landlord can still do well too.
A big trend among buy to let landlords and property investors is to buy an old building or plot of land, convert it into multiple let units, design it right, and manage it effectively.
High HMO Returns
Now, I have always been a sceptic about HMOs and have questioned whether after all the extra work, one can get a higher rent yield (and capital growth) than one can in standard buy to lets.
But I was very impressed when I saw Bill Patel of the firm I-Occupy deliver a speech at an event in the Spring.
Clearly, the keys to success are the right layout and use of space, good build design to maximise returns (and minimise costs) – and then, smart and efficient processes and on-going management of the let.
Bill Patel will be speaking at my event on 23rd November about how to do just this.
Even if you are not interested in the build side, you can still learn a lot from Bill about how to structure an HMO let for maximum returns, especially the processes that he uses – and to learn about the sort of areas where HMOs work.
Come to my event on 23rd November and hear more from Bill Patel.
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