Are you thinking about investing in a buy to let property? Do you already own a rental property but want to see a higher return? Then perhaps you should consider investing in a student HMO. With the rental market booming in the UK, there is one area which is experiencing huge demand - affordable student housing, in other words, HMOs (House of Multiple Occupants.)
Over the last five-year period, landlords that have invested in HMO properties have received average yields of 10-15% compared to 5-8% for standard buy-to-let (BTL) investors. This significantly higher return for HMOs even takes into consideration the fact that the average initial capital investment needed for an HMO is more than standard BTL properties.
If you are considering investing into student accommodation, we have put together some top advice and tips on HMO properties:
Location, Location, Location
Before contemplating on investing in student accommodation, you need to ensure that the property is in an area near to a university or other large educational facility. The street on which the house sits can make all the difference for the how much rent your rooms will command. Is it in walking distance of the university? Are there good public transport links nearby? Is it near to the centre where shops and nightlife are based? Remember that many students will not have access to a private vehicle so will have to rely on walking or catching buses/trains. If your rental property isn't near any bus stops, train stations or within walking distance of the university, then you should perhaps consider an HMO for young professionals instead.
Cancel the Council Tax
Under normal circumstances, landlords are liable for paying the council tax on normal HMOs. However, due to students being exempt from council tax, if you are only housing full time students in your rental property, your HMO then becomes exempt too. You will have to ensure that your tenants can provide proof of their education status so that your local council can validate the claim.
If you are going to turn your rental into an HMO property and it is in England or Wales, you be authorised by your local council and gain a licence. It must be stated though that only 'large' HMOs require a licence and 'large' is defined by:
- it is rented to 5 or more people from more than one household
- some or all of the tenants share a toilet, bathroom OR kitchen facilities.
Modern students will be looking for contemporary, bright and airy accommodation, with furniture included. The majority of students will not have their own furniture and will not have the spare finances to buy any for their accommodation. Students now adays will expect their bedroom to be kitted out with a bed, wardrobe, desk and chair, white goods in the kitchens and sofas/tables/chairs in the communal living areas.
Get Your Documentation in Order
One of things that can put people off becoming an HMO landlord, is the massive amount of paperwork required, as well as all the legalities surrounding it. It can be stressful and time-consuming trying to figure out what forms need filling out, keeping up to date with latest legislation and ensuring tenants have received the correct documents. The team at Tiili are experts in this arena and will take away the headache of HMO processes. We can manage everything, from Right to Rent status, credit referencing, employment checks, affordability checks, confirming identification, drawing up tenancy agreements and much more. By using an experienced agency to manage your HMO property, you can relax knowing that all legal processes will be followed and that your tenants will be thoroughly vetted.
It is vital that you carry out routine maintenance on your property as well as regular inspections. Not only will this mean happy tenants in a well-kept property, but it allows you to keep an eye on the building and ensure that the place is fit for purpose for the next lot of incoming students.
So is being an HMO landlord for you?
On the face of it, investing in an HMO rather than BTL can appear daunting, but once you have got set-up and processes in place, the financial returns you could get, far outweigh the start-up time, energy and outlay. Many landlords find that outsourcing the management of their HMO property, frees them up to concentrate on other areas. Here at Tiili, our team have in-depth HMO experience and knowledge, as well as the passion and drive needed to make your investment yield incredible results. From licencing to finding tenants, to carrying out inspections and organising deposits, Tiili can be as hands on as you need.
To find out more, please contact the team.