I am often asked by would be and established property investors, why I invest in HMOs.
My answer is simple: CASH. By letting your house to sharers you can receive up to 300% of the income that you would otherwise get. However, it is more common to achieve on average 100% additional cash flow.
With this additional cashflow, you can invest in further property acquisitions or go on that much needed holiday!
The reasons I love HMOs so much are because:
1. I get immediate and greater cashflow than I would not normally get from a single-let unit.
2. I still get the long term capital growth.
3. I do not need to fill all rooms to get a return on my investment!
In my opinion, the enhanced cashflow outweighs any disadvantages such as possibly higher maintenance costs. Once you have your system in place to deal with HMOs, the disadvantages dont matter any more, and you'll wonder why you never considered multi-lets before.
If you are still uncertain about HMO properties, I would suggest you sit down and do a quick calculation.
A 3 bedroom house with a downstairs lounge, that would normally rent to a family for 600 pound per month could bring in 1040 pound pcm if you were to rent each of the 4 rooms out at 60 pound per week; thats an additional 440 pound pcm, ie. an extra 5,280 pounds per year!
You only need to do this a few times before you start seeing amazing returns on your investment - four such properties would provide you with an income of around 20,000 pounds. This is not bad for a passive income.
So next time youre looking for an investment property, you should definitely consider converting it to HMO use. As always, dont jump blindly into making such a decision. Ultimately, it is your market that will decide whether a HMO would work in any one particular location.
If the market is accepting, try making one property work before you buy a portfolio in any one location.
Once you have developed a system to manage your HMO properties, you will find its no more work than managing a portfolio of single-let properties. All you need then do is replicate the system through further purchases.
