HMO’s are becoming increasingly popular, be it with private landlords, social housing as well as student accommodation. Looking at student accommodation in particular, HMO’s are outsmarting luxury studio flats as they are half the price for tenants and cash cows for landlords because of their higher profit margins, making HMO’s a win- win situation. There is the additional benefit of the flexibility involved for both the landlord and the tenant through the short and longer-term contracts available. However, the main goal here is to have 100% occupancy, so it’s essential to advertise your available rooms in the best places! Take consideration into the timing in which you place the add as most look a week before they are moving so a surge in activity and interest will happen within this time.
Firstly, in order to make good returns from any HMO, location is key to attracting tenants and it’s essential to know how to select the best location for your HMO.
How to select the best location for your HMO.
Property investments UK suggest making a spreadsheet inputting your chosen locations and research into category fields including yield, demand, supply, competition and population for each location. This should provide you with in depth information in where to search for a potential investment area for an HMO. You should research using different channels for example Zoopla, Google, Spareroom and Home for information regarding HMO competition, demand, average room rentals, vanilla yield and market activity such as Value change to properties. The current asking price is something to look into in relation to the number of bedrooms- in an HMO you need a high yield, a yield of 15% is often highly achievable, so you need to be earning an income to cover the costs over a number of years to ensure profitability.
When analysing your research, you should discard areas that have a yield lower than 10% and set further criteria to discard. For example- lower than 40 rooms wanted, more than 30 rooms to rent advertised, less than 15,000 households/property and less than 40,000 local population. Once this is done you can pinpoint the areas that offer the best value and give a 1-5 rating priority list. This can take time- but it’s worth it!
Website choice to advertise effectively
Spareroom- This website is used to advertise rooms and is a well-known trusted website where tenants can find rooms. This has additional benefits of providing a ‘’free room rental index’’ which allows you to see the demand for rooms in different locations across the UK. You can place your advert where it can be filtered by tenants so it is a refined search, be it non-smoking, pet free and whether you want to advertise a student or a professional tenant.
GumTree – This website has the benefit of being free however, the database tends to be of a younger demographic and a large proportion of students.
Tenants4U – Through this website you can advertise your rooms on Zoopla and RightMove for a sum of £30, which is a good price. Try and capture tenants quickly by using attractive professional photographs.
Estate Agents – this can be useful to find people locally and lift the work off your shoulders.
Social media- can be good to find someone you know or that is recommended. It narrows the search pool and can be useful to find people who know each other.
Here are a few tips to managing your HMO so you are able to market it effectively to grab tenant’s attention.
Make sure the price is right, have a look at what similar HMO’s advertised are asking and compare this with what you are offering. You don’t want to overprice or lose potential income through setting the wrong price or risk having empty rooms. Look at what the market is offering by getting in touch with estate agents and looking at property websites and look if bills are included or not. This can be an attractive package for tenants, especially in an HMO when people don’t know each other, it can be a hassle to organise so in this market it can be a great selling point. However, be wary that tenants may take advantage of this, or not take note of their energy usage and then you are left with a very high energy bill…
Design & Facilities
Effective and attractive interior design shown effectively in photographs will make your HMO stand out on websites, it will also shape who your advertisement is aimed at, be it students or professionals.
Ensuites or modern facilities makes a difference to its’ level of demand. When looking at the student market for instance, standards are increasing as more student tenants look for ensuites and modern facilities and HMO’s are competing against private student accommodation providers! On Spareroom, the option for potential tenants to be able to just see ensuites is a plus for you advertising an ensuite.
Reference checks, deposits and guarantors
The professional manner in the way you do this reflects the type of tenants you will have in your property. Make sure you carry these out so you don’t have any risky tenants or financial issues with your tenant which can be a nightmare!
Inventories and Inspections
It is essential these are listed and photographs are taken of the whole HMO in case money is needed to be taken out deposits and there. You could go and invest In an app that will take an electronic documentation of inventory and supporting photographs.
To keep happy tenants and not be bombarded with work orders make sure you have everything sorted before the tenants arrive or you may see them leave if they have to deal with continuous problems.