When you have a property you wish to let out, you have two options – HMO or single let. A HMO (House of Multiple Occupation) is when a property is occupied by three or more people who do not form a single household, whilst a single let has one tenancy (often one person, a couple or a family). Both have advantages and disadvantages, but ultimately the right choice for you depends on the property and your circumstances.
If you are new to the property investment market, single let is the best way to go. There are fewer regulations and licences involved in standard buy-to-let in comparison to HMO’s, and it is easier to let one unit than several all at once. With HMO’s you have to deal with several tenants for one property, rather than just one. It is best to grow your experience with single lets before giving HMO’s a go.
HMO’s generate more income when fully occupied than single lets. However, this needs to be put into perspective too. There’s often more upfront costs when investing in HMO property. Investors selling HMO property know they yield more so are likely to charge more, and it often costs more to convert a property into a HMO too.
HMO’s and single let properties attract different audiences. HMO’s often attract people who are unlikely to live in the property long term, whilst single lets retain tenants for longer periods of time. So although HMO’s may generate a bigger yield, they often take more work to keep the property in full occupancy for as much of the year as possible and finding tenants becomes more of an ongoing process. The advantage of HMO’s, however, is that all your tenants are unlikely to leave at the same time, meaning a consistent income. If a tenant leaves a single let, the property main remain empty for several months before finding a new client which can have a big impact on your income.
HMO’s generally suffer a rougher treatment than single lets. This can be due to the property being occupied by students, or simply because people don’t intend staying in the property for a long period of time. Single let tenants may permit a landlord the luxury of a generous co-maintenance clause in the contract.
Easiness of selling
When it comes to selling your investment property further down the line, single let properties are often easier to sell than HMOs. HMOs generally only appeal to property investors, and they will be looking for a good deal to make their investment worthwhile. Other buyers are not attracted to HMOs as it takes a lot of work to convert them back into a single unit. Single let properties attract property investors and private buyers alike, so it’s likely you’ll have greater interest in the property and be able to sell for a higher price.
When choosing HMO or single let, it is important to take all these factors into account before making the final decision. Both can be hugely successful and help you see big returns!
Here at Nick Fox Property Mentoring, we provide mentoring services and other resources to help you when it comes to property investment. Find out more about our property mentoring here and our resources here.
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