How do you maximise the value of your HMOs?

April 20th, 2018
How do you maximise the value of your HMOs?

There are many ways to increase the returns from an HMO property. With the right development strategy in place, you are guaranteed to see an increase in the rental yield of the property and ultimately the cash in your pocket. The size of your property matters, and as a minimum you should focus on getting at least 5 tenants in each HMO to successfully spread the cost of electricity, gas, water and council tax sufficiently to create a healthy profit. If the first 3 tenants cover your costs, further tenants mean profit.

One way to increase your chances of adding value to you HMO property is to look at extending the property, normally by either a one or two-tory extension. Building an extension will significantly ramp up the potential of an HMO, however it may require higher initial costs and effort. If you are restricted by budget, instead of looking at building an extension, you could aim to create an extra communal space, a common way of doing this is by building a conservatory. Conservatories have great value potential. If your property already includes a large kitchen, you may combine it with a spacious conservatory and create the primary communal living space in your HMO. This will allow you to convert the other communal space, usually the living room, into an extra bedroom. You could also do this with an un-used garage.

The second thing to consider is interior design. It is a simple, cost-effective and efficient way to increase the value of your HMO. The returns you can generate from some simple interior design are high, so it’s well worth considering. If you don’t want to go down the route of building a double story extension, or the hassle of converting a garage, then something as simple as one or two interior design tweaks can make a huge difference. Unlike with a single let, where you might add a maximum of 10% to the rent achieved with a high quality refurbishment, HMO rents can be increased by up to 50% for a room with nice flooring, wall finishing and an en suite.

As you start researching HMOs in a given area, something that you will find is that the rooms on offer tend to be very standard and often quite dull. In typical HMO promotional photographs, you might see a bare mattress or a non-made up sofa bed. Furthermore, there might be a lack of furniture or evidence that the rooms haven’t been painted recently. You should always aim to stand out and remember your staging photographs used in promotions are very important. If you invest a little bit of time and resources on doing something as simple as making your property stand out you are likely to see great results.

Any small increase in the yield of an HMO property will add up significantly over time – if your property has been freshly painted with consistent colour scheme running through it and shelves and pictures, then you can charge more for the rental of each room compared to other properties on the market which haven’t been decorated: an extra £5 or £10 per week will really add up in the long run.

In summary, the biggest challenge is to think creatively about the space and add to that space where possible. This of course will be dependent on the budget available but even a few simple, cost-effective changes to interior design can make a big difference. As you move up the value chain and create higher quality HMOs you will attract a higher number of tenants and receive higher rent in return, but the real challenge will be to ensure that they are managed efficiently.

HMO management software

Arthur’s property management software enables you to have complete control over all aspects of your portfolio and it’s accessible from your computer, tablet or mobile phone. Arthur brings landlords, tenants, contractors, agents and owners together all under the same interface, making problem solving a breeze. With our system, you can manage your portfolio from anywhere in the world, which is guaranteed to give you peace of mind as you expand your business. Arthur provides you with complete flexibility and is excellent for multi-unit properties (no matter what size) such as: student accommodation, blocks of flats and HMOs.

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