Also known as Houses of Multiple Occupation, HMOs are extremely profitable – provided you use the correct investment strategy. Deriving far more income than the conventional buy-to-let investment, this is a popular way for property investors to make a large income in a short space of time. That’s because, unlike the traditional buy-to-let which brings in one rental income a month, the HMO will bring in five or six – or however many rooms you rent out. Think of it as the equivalent of buying in bulk at the supermarket!
Of course, you’re not going to get all that money for nothing. HMOs are large properties, so you’ll have to fork out a lot of money to begin with – whether in terms of a huge cash buy or a mortgage deposit. Then there’s the increased workload involved. Most investors though find it’s well worth it – to the extent they can afford to retire far earlier than their buy-to-let investor friend.
What is an HMO
Basically an HMO is a property investment which involves renting out at least three rooms (and usually more) to individuals who aren’t related. It will have a communal kitchen area, multiple toilets and sometimes a shared lounge area.
It tends to be the kind of property rental used by students and found in university towns, or by young professionals in city-centre locations.
Owning an HMO involves jumping through lots of hoops as far as the local authority is concerned; they are extremely tightly regulated in terms of fire- safety regulations and other health and safety concerns. In order to rent out HMO rooms you’ll need a council-approved certificate. It can also be difficult to convert a traditional property into an HMO in certain parts of major cities where local councils feel there is already a high density of them.
Pros of investing in HMOs
However, once you do get over those obstacles, there is no denying that owning an HMO can prove to be an extremely successful strategy. And owning more than one is even better!
- Your profit with one HMO will always be higher than that of one traditional buy-to-let (often with yields up to three times higher).
- Void periods don’t tend to have as much impact (in the sense that if one person moves out unexpectedly then there are still others there providing rental income).
- You can get others to do all the hard work by passing it over to an HMO management company for an agreed monthly or annual fee.
- If there’s any refurbishment and/or structural work to be done when initially purchasing an HMO then you can claim revenue tax deductions.
Owning an HMO in West London can be lucrative
Property in West London overall has gone up by 13.8% annually since 2010, and that means good news for investors – certainly in terms of capital appreciation.
At present the type of yields landlords of HMOs can expect to receive in West London are roughly as follows: Hounslow 5.3%, Acton 4.1% and Ealing 4.5%, which are all much higher than your standard rental yield on a traditional buy-to-let property.
How to find profitable HMO properties in West London
We have a whole list of available HMO property investments in West London on our website and we can also put you in touch with an expert in the area who is happy to source investments for you. Simply send us an email via our website or call us on 0333 123 1330. Build a new future for yourself today!