Many people talk of HMOs in the real estate sector without knowing what these really are. In layman’s language a HMO (House in Multiple Occupation) is a property rented out by at least 3 households that share facilities such as kitchen, bathroom or toilet.
These properties have today become popular with investors owing to their several benefits. Therefore, if perhaps you are wondering where you can invest your money for a great return on your investment think no further than this category. Here are the benefits you can derive:
1) Above Average Returns
The main reason many investors turn to HMO (Houses in Multiple Occupation) is that they yield above average returns. These properties are far more profitable than their counterparts and studies reveal that their rental incomes often double if not triple those of single households. The individual rooms split between different occupants can generate more money than if the entire property is let out to a single household. This is because you would be literally getting income from every household as opposed to one.
2) Houses in Multiple Occupation Hold less Risk
Any investor wants a venture that carries less risk. Property investing just as any other investment is not without risks and the main one being occupant’s failure to pay rent. This risk is higher in single-family rental houses because you deal with only one household and as such if they are unable to pay rent, then you earn no income. However in HMO, this risk becomes minimal because you deal with many households such that even if one family is not in a position to pay rent you can still receive rent from other households.
3) Growth Market
With these tough economic times, many tenants are opting for multiple occupancy because this type of accommodation is the cheapest. The market is constantly growing and shows no signs of stopping any time soon, a trend which is great for investors looking for long term certainty of tenancy. If you are not sure about this, you could research on the local demand as part of your due diligence process to find out this information yourself.
4) Easier Exit
Even though property investing is a long term engagement, at some point in time you might feel that you are tired and want to try something else. What then? Well if it is a HMO property that meets all the hmo requirements, getting a buyer will be a walk in the park as long as the price is right. HMOs are considered performing assets especially in these tough economic times when tenants prefer multiple occupancy to single. Consult the local agents; these people have a captive audience of investors out of which one might be interested in buying your property.
Houses in Multiple Occupation are a great investment for many reasons including the ones mentioned above. However, there is more to this investment than simply building or buying and letting especially the legal aspect. Therefore, before you start, consult a reliable property attorney for legal advice on how to ensure your property is in compliance with all the standards laid down and how to obtain a hmo licence