The current economic climate is perfect for launching a successful HMO (Houses of Multiple Occupancy) business.
HMO’s can be a good option for getting a secure income and good rate of return on your investment. Today’s the perfect time to start because:
- Demand for affordable housing is increasing.
- The cost of borrowing is low.
- Property prices are likely to go up relatively soon.
Furthermore, certain tax changes are making it more beneficial for landlords to launch professional HMO businesses.
Here are a few tips on how to take advantage of the circumstances and to launch a professional HMO business.
Know the Legal Rules
It’s important to know the local rules before buying or converting property into an HMO. The good news is the law is changing on 1st October 2018 in England and Wales to simplify the licencing requirements. From then on the definition of a HMO states that a HMO is a property occupied by five or more people, forming two or more separate households.
You can find more about the law here.
Get a HMO-Specific Mortgage and Insurance
You’ll also need to have HMO-specific mortgages and insurance in order to run a legal business. Deal with a professional service to sort out your existing mortgage or sorting out your insurance needs.
Find the Right Property in the Right Location
Location is everything when it comes to generating profits with any type of letting business. You want to find an area with the right appeal – people who typically stay in these types of properties are students and young professionals. They value good transport links and access to shops with 24-hour opening. You’ll also want to aim for properties with six rooms or more. The more rooms you’re able to let, the more your rental yields will grow.
Refurbish with Your Target Market in Mind and Focus on Future Proofing
Know enough about the location to understand your target tenant. Refurbish with your audience in mind, keeping it simple and clean. You also want to future-proof your property as much as possible. This means using materials and suppliers with the highest durability and warranty, as it will cut costs in the long-term.
Pick the Right Tenants
You must carry the right reference checks and follow the deposit protocols to guarantee yours and the tenant’s safety. Upad’s process is simple and it’ll help take the burden off your shoulders for as much or little as you want. A good tip with HMOs is to avoid mixing different tenant groups. So pick students, young professionals or housing benefit tenants, and try to avoid mixing them.
Compare Utilities Regularly and Retain Ownership of Them
It can be beneficial to maintain ownership of utility costs and instead of having tenants pay them separately, simply include them within the monthly rental income. In addition, you should always regularly compare utilities and find the cheapest providers to avoid huge hikes on rents or your own operating costs.
Work with Professionals
Setting up and managing a successful HMO portfolio takes time and it requires expertise. Don’t be afraid to ask for help or to outsource certain aspects of management to those with specialised knowledge. You can use a specialist management firm to cover different aspects of running the business and maintain control, make a profit and reduce stress.
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