Investing in HMOs can be a great idea as long as you do your homework. If you can avoid making mistakes you are going to make a lot more money and cut out a lot more risk when it comes to your investment.
Don’t rush – investment is a marathon, not a sprint.
Do get to know your competition. If you know what your competition is doing you can do it better. Offering a better quality of service is how you get clients, or in this case tenants. It is important to understand what the competition is doing with their houses. Then you can start to build a picture as to where you want to fit into the market. It is through examination of the details that you can decide what rent you are going to charge. But, more importantly, you can make sure that your property stands out above the rest. It is by doing this that you will get more tenant viewings, more tenant applications, and tenants that will stay for a longer period of time. All this you will achieve by making sure that you are offering the best possible service for the area.
Don’t pick the wrong letting agent.
Do get to know the letting agent and their experience levels, depending on the tenants you’re wanting. Not only is it important to pick an agent with HMO experience but you also want one with experience in working with your chosen tenant profile (that is the type of tenant that you are looking to attract). Too many HMO investors pick an estate agent who lacks the necessary set of skills to properly manage the property.
When you speak to agents you want to ask them about their experience with HMOs. You also want to meet them at the property and really get to know what kind of tenant they are used to working with. It is going into this kind of detail that you will find the right estate agent for the job.
Don’t invest before researching the area.
Do check if there is enough demand for houses and rooms in the area. HMOs are often presented as being fantastic income generators. We hear all the time about their superb rental yield and cash flow. And this is all true. But if you invest in the wrong area and they don’t rent out or they take too long to rent out there will be void periods and you can lose a lot of money.
So, simply buying an HMO, or converting a property into an HMO, does not mean that it is going to deliver. I can’t stress enough how important it is to do your research and make sure you know that there are enough people in that local area looking for a room in an HMO.