Is it still worth owning an HMO?

A house of multiple occupants or HMO is a property where the landlord rents out rooms to individuals or occasionally couples. These rooms will have shared living spaces and kitchens, though bathrooms are likely to be private or ensuite in most cases.

Some people tend to associate HMOs with student lets, and it is true in many university towns HMOs do end up being let by those studying. But these aren’t the only type of HMO and students aren’t the only type of person who wants to rent a room.

What type of person lives in an HMO?

Broadly, anyone who either doesn’t feel the need to live in a whole house alone or someone who can’t afford to live in a whole house alone. There is an increasing population of single people for whom living in a 2-3 bed family home is impractical due to the rental price, availability and it simply being too big for one person. Some of these people may choose to live in a 1 bed or studio flat but within the Torbay area, those are in very limited supply. They can also incur high service charges and other costs.

Additionally, a benefit of living in an HMO is that bills are normally included. This means the average HMO tenant is paying less than a stand-alone rental property and also doesn’t have to be worried about budgeting for bills as they know they are included and can simply budget for the one rental bill.

Often, we see young professionals living in HMO properties as they want to keep their outgoings to a minimum while they save for a house deposit or similar goal. But this isn’t the only type of person we find is attracted to an HMO rental. There is also demand from those whose circumstances have suddenly changed, for example, following a relationship breakdown, or those who simply struggle to access other rental options.

Why is demand so high for HMOs at the moment?

Demand for HMO properties is currently very high. We manage a number of HMO properties, most of which are 8 or more person properties and they are consistently full. If a room does become available it is normally filled in no time at all.

Although there has always been good demand for HMO properties in the Torbay area, we have seen this demand increase significantly over the last couple of years. This is partly due to people’s living situations and circumstances changing during Covid, such as relocation or income changes. But it is also due to the significant increases in rental values throughout Devon and the decreasing availability of rental properties due to some landlords selling in the high-value property market.

If you currently have an HMO and are struggling to manage it or find you are not filling rooms as you would like, please do speak to us as we have an almost constant stream of enquiries for these types of rentals.

Getting a return on investment with your rental property

At the end of the day, you have a rental property to make you money and to provide a return on investment. For larger many-bedroomed properties this can be tricky as you will have a limited market if renting the property as a whole. This is where an HMO setup can provide an ideal alternative that gives you a better return on investment.

In the Torbay area, it is not uncommon to find old hotels, larger B&Bs or even large Victorian townhouses for sale. These are properties that could make an ideal investment property if turned into an HMO. Properties that have large kitchens or that have been previously used with a commercial kitchen set-up can be particularly useful as this makes it somewhat easier to create a large enough kitchen area for multiple single occupants to cohabit peacefully.

Things to consider when setting up an HMO

When creating your HMO, you need to consider what a tenant will be looking for and how they are going to live in the property. When you look at a normal rental property for a family or similar you tend to think about how the family will share the space. But in the case of an HMO, you need to think about the practicalities of strangers coexisting in a shared space. The key to all of this is space.

Try to ensure the bedrooms are large enough that someone can store their life inside it. The key private space for that tenant is their room so they need to be able to fit all their personal belongings inside the room. This might include space for a work desk, laptop desk or small tv.

Wherever possible, try to make bathrooms ensuite. You would likely be uncomfortable sharing a bathroom with strangers so why would your tenants want to do that. Having ensuites reduces conflict by ensuring it is a private space and also helps to make the property more attractive to tenants. If you find you have to provide a private bathroom along the hall rather than an ensuite, make sure you consider how the tenant will access the space and keep it private.

The kitchen and laundry spaces are always the most likely areas for conflict to arise, so make sure you have provided plenty of space and considered how the spaces work with high traffic flow. Many of the HMOs we work with will kit out their kitchen spaces more like a commercial kitchen to ensure they are easy to clean and offer enough counter space. The same applies for laundry spaces: make sure there is enough space and that it is clearly set out how the space is to be used as this helps to avoid miscommunication and conflict between residents. We will cover the issues of managing a HMO in more detail in our next blog.

If you are looking to become a landlord of an HMO, why not give us a call for some free expert advice and find out how we can support your property investments.