Could your next property investment be a HMO?

Let’s talk about property investment. Many first-time investors come to us with plans to start small – perhaps a two-bedroom flat near a train station. Other ‘accidental’ landlords request our full property management service after being left a property in a will or deciding to rent out a property they currently live in. But what next?

Many of our clients started out with a one off or an unintentional property investment but having experienced the smooth running of the let under Jones Robinson’s guidance, as well as the exceptional returns in the face of historically low interest rates, come back to us asking about expanding or upgrading their investment portfolio. This is where we might mention HMOs – Houses in Multiple Occupation.

Buy-to-let returns are usually two-fold – short term gains on the yield and long-term prospects brought about by property price appreciation. HMOs have recently proven to be the most profitable of property investments, outperforming standard single-occupancy buy-to-lets by 40%, according to Platinum Property Partners. The property investment firm found that with a 25% deposit, HMOs achieved a total return on equity of 108%, compared to 77% for standard buy-to-let properties.

Jones Robinson has the pleasure of working with Phil and Lynda Emptage, the owners of The Red House – an 11 bedroom HMO in Basingstoke. The couple bought the large house, which had lay derelict for many years, with an ambitious plan to turn the residence into an ‘all inclusive’ rental offering aimed at professional workers. Each suite was let with an en-suite bathroom, a full furniture/accessories pack, a 19″ flat screen TV/DVD, tea and coffee making facilities, cabling for Sky TV; BT Infinity fibre optic broadband and a contemporary decor. There’s even the option for tenants to choose a weekly housekeeping/cleaning package and have the bed made up with crisp white cotton linen on a weekly basis.

home

Communal facilities within The Red House include a fitted kitchen with breakfast bar, a large shared dining area and two laundry stations. Speaking about their venture – which Jones Robinson fully managed for the couple – Phil and Lynda said they were thrilled with turning a local Hampshire eyesore into a modern HMO.

Top tips when considering a HMO

  • Buying a HMO will usually be more expensive than a regular buy–to-let due the size of the property
  • Factor in any conversion and refurbishment works – it’s worth getting some builder quotes before you make any offers
  • If you are converting a property into a HMO, ask Jones Robinson about how best to maximise the space to increase returns – we can work out the desired number of bedrooms and rent to meet any mortgage obligations with hopefully a profit
  • Bear in mind there are an increased number of legal obligations and laws surrounding the running of a HMO – the Jones Robinson team can explain these to you in more detail
  • Refurbishment, repairs and associated insurances are all usually higher with a HMO but, as illustrated, the returns are usually greater so you can offset the running costs
  • Think about your target market – students, recent graduates or working professionals looking for a Monday to Friday ‘crash pad’ – a decorate/furnish accordingly
  • For the best tenants and returns, steer clear of marketing a property as a house share or bedsit. Mini flats or suites are more modern and attractive descriptions

For more details about properties for sale in West Berkshire that are suitable as HMOs, advice on creating the best HMO set up and managing a HMO property, contact Jones Robinson today.


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