Tips for creating an HMO

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Tips for creating an HMO

Buying a property to let as a House in Multiple Occupation (HMO) can be a great investment, and have become increasingly more popular with landlords and tenants in recent years, especially in larger cities.

Landlords are often able to acquire greater monthly yields and higher monthly profits that leasing out a whole house to one tenant. As such the return on investment can be higher with an HMO.

Of course, with multiple tenants comes more paperwork, more admin and a raft of legal rules and regulations to provide each tenant with what they need. Meeting your legal obligations and providing a quality dwelling will reduce headaches and increase profits in the long-run.

This sounds obvious, but so many landlords cut corners and get a bad reputation with tenants. Follow these simple tips for creating an HMO:

Go for larger room sizes

And also, houses with a large number of rooms! It is often considered that landlords should focus on leasing to five tenants or more to enjoy a solid net income after all costs are met. Experts consider the first three tenants to be the ones covering costs with any additional tenants starting to create profit.

But it is also worth considering that too many tenants will make it feel more like a hostel than a close-knit household of friends. Aside from the commercial aspect, bigger rooms will improve the tenants living experience. In an HMO, your bedroom is your only private space. Old Victorian houses with large rooms and high ceilings are great investments for HMOs.

Pick the right location

In the region of 1/3 of HMO, tenants have cars, so your property should be within short walking distance of a town centre and have good public transport links. It may seem desirable to pick an area because of lower costs, but this needs to be balanced out with the desirability of the area. Look for somewhere professionals would be happy to live but cheap enough to bring in profits.

Don’t mix tenant types

Different lifestyles have different ways of living. Professionals will hold different hours and want a different home vibe than students. Colliding different types of tenant increases the chances of noise issues and other disagreements which you might have to deal with.

Seriously consider what type of tenant you want and what will be most popular in the area your property is in. Maybe test demand with listings on some relevant websites.

Regardless of what type of tenant you choose it is important to create a community that will make people want to live in your HMO property in the long run.

Invest in higher finishes

You may consider getting jobs done on the cheap to increase your profits, but spending the money to create high-quality HMO rooms with nicer finishes (and even things like ensuite bathrooms) will attract higher rents and keep happier tenants. It has been known to be able to increase rents by up to 50% for better decorating and quality flooring etc. This is also likely to attract a better quality of professional tenant.

Keep on top of the legal requirements and spend for the best quality

HMO properties are subject to more regulation, which can mean an initial higher spend (especially on big refurbishment jobs) but it is worth the cost. Keeping on top of regulations and keeping your tenants safety as a top priority will be essential to success. Extra requirements tend to include:

  • Fire doors
  • Additional fire alarms
  • Emergency signage or lighting
  • Fire escapes
  • Extra toilets or bathrooms

As tenants are only renting their individual rooms, with the rest of the house being communal you will also be obliged to make more tests of fire alarms and bear responsibility for ensuring communal areas are kept clean and free of hazards. Many HMO landlords invest in a cleaner for these areas.

HMO residents will also expect basic furnishings like beds, wardrobes and side tables in their rooms with access to white goods, kitchen equipment and a television. Investing in all this is essential.

This isn’t an extensive list of everything you can do to ensure the success of your HMO but these starting tips will give you a better chance of making a profit with less hassle.


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