If you’re looking to invest in property, HMOs (Houses in Multiple Occupation) are a great option. Not only do they offer the potential for high rental yields, but they’re also relatively low-maintenance compared to other types of investment property. This blog post will walk you through the six steps you need to take to invest in an HMO property.
Research the market.
As with any investment, it’s essential to do your research before investing in an HMO property. To succeed, you need to understand the local housing market and what type of tenants you can expect to attract.
Make sure to visit local open houses and talk to local estate agents to get a well-rounded view of the market. You can also read online articles and forums to get an idea of what other investors are saying about the market.
Either way, it’s important to clearly understand the market before making any decisions. This is a crucial step that you cannot afford to skip.
Find a good location.
The location of your HMO property is one of the most critical factors determining its success. Look for areas with high demand from tenants, such as locations near universities or hospitals. You should also ensure that the property is situated in a safe neighborhood with good public transport links.
This is because tenants will be more likely to want to live in a conveniently located property and easy to get around. If you can find a property that ticks all of these boxes, you’re off to a good start.
In addition, it’s also a good idea to look for properties that are located near other HMOs. This is because there will already be a demand for this type of housing in the area, which makes it easier to fill your property with tenants.
Seek the help of HMO experts.
If you’re new to investing in HMOs, it’s a good idea to seek the help of an HMO mentor. These are people who have a lot of experience with this type of investment and can offer valuable advice and guidance.
There are a few different ways to find such professionals. One option is to join an online forum for HMO investors and ask for recommendations. Another option is to contact a local property management company and ask if they have any experts on staff who can help you out.
In either case, it’s important to do your research and ensure that you’re working with someone reputable and knowledgeable. This will save you time and hassle in the long run.
Get the right mortgage.
Investing in an HMO property requires a different type of mortgage than a traditional buy-to-let mortgage. Be sure to speak with a mortgage broker who is experienced in arranging HMO mortgages to get the best deal possible.
You’ll also need to consider the fact that you’ll likely need a larger deposit than usual, as most lenders require 25% or more for an HMO mortgage. This is something to remember when you’re saving up for your investment.
In addition, it’s important to factor in the costs of any necessary renovations or repairs that need to be carried out on the property before it can be rented out. This is something that your mortgage broker can help you with as well.
Choose your tenants carefully.
Since you’ll be sharing your property with multiple tenants, it’s crucial that you take care when selecting them. Make sure to screen each tenant carefully, and consider doing a credit check and/or referencing their previous landlords.
You can ask each tenant to fill out a detailed application form. This should include questions about their employment, rental history, and credit score. This will help you to weed out any potential problem tenants before they move in.
It’s also a good idea to draw up a tenancy agreement that sets out expectations regarding noise levels, guests, and other areas where there could potentially be a conflict between tenants. By taking these precautions, you can help to ensure that everyone is happy and that your property runs smoothly.
Maintain the property well.
HMO properties can be more challenging to maintain than traditional investment properties, so it’s vital that you budget accordingly for things like repairs and routine maintenance. Having someone on hand who can deal with any problems that may arise, such as noisy tenants or broken appliances, is also a good idea.
You may also want to consider hiring a professional cleaning company to regularly clean your property’s shared areas. This will help to keep the property looking its best and make it more attractive to potential tenants.
Regardless of how well you maintain your property, there will always be the potential for problems to arise. That’s why it’s important to have a good insurance policy in place that will protect you financially in case of any damages or accidents.
If you’re thinking about investing in property, HMOs are definitely worth considering. By following these six steps—researching the market, finding a good location, seeking HMO experts, getting the right mortgage, choosing your tenants carefully, and maintaining the property well—you’ll be on your way to success as an HMO investor!