Read on if you are an investor who’s decided that they need to give up work and live off rent immediately…
If your investment strategy involves holding a smaller number of properties but getting maximum rental income then buying HMOs is your way forward.
HMO stands for houses of multiple occupation and is generally occupied by three or more tenants each on their own tenancies.
A savvy HMO investor will be able to find a below market value property and transform the space into one where all usable rooms bar kitchens and bathrooms are bedrooms. That way they are paying minimum for their mortgage and getting maximum rental – so (in most circumstances) the cash flow is alot bigger than a single let.
Also BUYING BELOW MARKET VALUE HAS A BIGGER ADVANTAGE, buying cheaply (using cash or bridging) doing up and then remortgaging means that you can recycle your deposit. That way you are getting cash out quickly so you can plough it back into your next investment.
All sounds awesome right?
There are a few caveats on HMOs which you need to be aware of. As you have far more tenants then a single let it is going to be more management intensive. Tenancy renewals come around more often, you could get voids on rooms and you need to be more aware of your book keeping. Finally, because of the introduction of Article 4 and the HMO licensing scheme it is harder and there is a lot of admin involved in setting this up. So you must do your research.
So be warned THIS STRATEGY IS FOR THE TIME RICH!
However if the downsides don’t seem to phase you in the slightest then this could well be the investment strategy for you. You have the potential to buy quickly, make a good cash flow and only with a handful of properties.
So is it time to start looking for those two beds that have a few bedroom sized reception rooms on the ground floor?
I’d love to hear from you if this is your strategy or you want to know more so leave comments below on how you have found investing in HMOs or what steps you are going to take to buy your first or your next one!
NC
