September 21st, 2021.
A Guide to HMO Investment
Houses of Multiple Occupation (HMO) is a dwelling where unrelated tenants rent their home from a private landlord.
When it comes to buy-to-let, HMOs can be extremely rewarding in terms of a return on investment. However, before you invest in an HMO property, there are several factors that you need to carefully consider when making this kind of purchase, including how involved you would like to be, the type of habitant you want renting, and where the best HMO location for you to invest in is.
Getting these details right is crucial when it comes to making your investment a success.
Hands On or Hands Off?
Deciding how you would like to manage your HMO property is an important step of the investment process. Will you choose to be closely involved, and thereby potentially cut costs? Or, will you hire an HMO company to take care of your property instead?
Your circumstances and aims will influence your decision here. For instance, if you have found a suitable location close to where you are based and are willing to make the time commitment, then managing the HMO yourself may be a practical option.
On the other hand, the benefits of hiring an HMO company to take care of your portfolio are that you will have much greater freedom in terms of the location, at the cost of a percentage of your profit.
How to Choose Your HMO Location
Knowing exactly what you want is essential for finding the best location to invest in an HMO property.
For example, if you want to create student accommodation, a location close to a university and in an area that students commonly live is essential. Alternatively, if you are aiming to attract young professionals as your tenants, then your HMO should be near transport links, business parks and local amenities.
So, where are the best areas for HMO investment? Keep reading to learn our top picks for students and professionals.
The Best Locations for Student HMOs
The best locations to invest in student HMO properties include, but are not limited to:
- Birmingham– a self-proclaimed ‘student city’, Birmingham is home to 80,000 students, studying at 8 universities.
- Nottingham– home to both the University of Nottingham and Nottingham Trent University, this city is also renowned for the affordability of its property.
- London– though properties in the capital are comparatively expensive, London is also a high-profit area due to demand from its high student population, which includes wealthy overseas students.
- Coventry– attracting over 35,000 students every year and in close proximity to the University of Warwick, Coventry is a great place to invest in student housing.
- Glasgow– with several universities and colleges, and property on the affordable end of the scale, Glasgow is a strong contender.
- York– the universities and transport links here mean that you’re going to see a great return on any investment.
- Reading– another location boasting two universities, Reading is a rapidly expanding city ideal for students.
- Oxford– though property prices are high, rental rates are also on the upper end of the scale, helping you comfortably turn a profit.
The Best Locations for Professional HMOs
- Southampton –with almost 13,000 businesses operating in Southampton, you’ll find plenty of young professionals looking for house shares.
- Manchester– as one of England’s largest business cities, there are plenty of opportunities in Manchester that will see a great ROI.
- Nottingham– not just a thriving student city, but an excellent place for business. Nottingham is an ideal location to set up both student and professional HMOs.
- Blackpool– this seaside down isn’t just great for tourists, it’s also a very profitable place for buy-to-let investors.
- Kingston Upon Hull– with roughly a 7.5% gross rental yield, HMO property in Kingston will see you with a fair return.
- Birmingham– another city that’s ideal for both students and professionals, Birmingham is one of the West Midlands’ biggest hubs for business.
- London– we can’t mention business hotspots without including the capital. Though London property prices are the highest around, the location’s desirability means renters should be easy to attract.
- Portsmouth– this port town plays host to hundreds of businesses and is home to thousands of young professionals.
Pin-pointing the exact places in these cities to purchase homes will require a lot of in-depth research which is best done yourself, with help and guidance from an experienced local property expert.
As well as choosing an optimum location to invest in an HMO property, it’s important to remember that the best way to turn a profit is to get the best rates on your mortgage.
So, talk to a HMO mortgage broker with access to the whole market in order to ensure you’re in the best possible position.
Talk to an Expert Today
Here at Pure Property Finance, we’re experienced at sourcing specialist HMO finance, whether you are looking to buy or refinance a property.
Call us today on 02920766565 to discover your options and receive a tailored quote.
Originally published: 12 Aug 2014; updated 23 November 2023