Why is 2020 the year of the HMO?

Renting a House in Multiple Occupation (HMO) has always been a great opportunity when it comes to the rental market. However, in the new year, there are new and exciting opportunities to diversify and look at other ways of income (and possibly of different ways of earning money from property).  What are the reasons to think about an investment into the world of HMO property rental? 

Here are 5 good reasons to invest in HMO specifically… 

Firstly, the increase of income. Here’s where we could use some sort of external figures, however you only need a calculator to work out that this is a great way of gaining a higher income. One house can be rented for a standard market price (for an example let’s say £1000 a month for a four bed house), this is the price that is to be payed to you by everyone living in the property. Alternately, you could make up to three times the income by splitting the house into a HMO with four rooms. In the example given, even if you halved the rent for the house and charged that to three separate people, you’d be still be making £500 a month more than the conventional rent price…

Secondly, rental voids have much smaller of an impact for you. This is due to the lack of an empty house. If you split your income among the people living in the property, as soon as someone leaves it doesn’t end up with you being completely out of pocket, as there will still be people living in the property. Of course there will be a loss of income, however this will be easier to combat. Due to the house being ready to move into to, a prospective tenant can meet the other tenants (get to know them) and decide if the house is right for them. On top of this, you only have to find one person, rather than a whole house. 

Thirdly, you are less likely to be harshly impacted by rent arrears. This is a difficult point – no one wants a tenant to get into arrears. However, this is something that can be an issue among rental markets, and if someone behind on payments is a smaller part of your income (because they are one of many in the property), it can be much easier to deal with. 

Another (very important) point is that tax is easier to pay when rental properties are registered HMOs. Whenever talking about tax-deductible costs, it’s worth remembering that it can be a complicated issue and each case is unique. That being said, there are some HMO tax benefits that are clear. Such as, deciding to change the property by adding an extension after you have bought a property for HMO property rental, these improvements can be classed as a ‘revenue cost’.

Finally, it streamlines your property portfolio. A very useful feature of renting via a HMO property rather than traditional rental. This means that you will have a better grasp of your income, any work needing doing to a property will be easier to notice and then get done, and you can better manage your time and energy into being a better landlord to a smaller group of properties (or single property).  

So there are so many reasons that 2020 is the year to start investing in HMO! 

Nick Fox started his property investment career 10 years ago and his portfolio has grown to one of the largest in the UK. Nick now mainly focuses on HMOs (houses in multiple occupation) and works to help others achieve property success too. Visit here to find out how he can help you.

Trackback from your site.

Leave a comment