With the economy expected to remain uncertain and a recession looming, property investors have started to seek out alternative investment opportunities. One market trend that has gained popularity is the conversion of individual properties into multiple units, such as commercial conversions, or turning a single terraced house into two self-contained flats. This is due to the higher rental yield from multiple units, making the investment safer and more lucrative.
As a seasoned residential investor or developer, staying abreast of the latest market trends and opportunities is of the utmost importance. One area that may prove particularly profitable above the rest in 2023 is exploring the lucrative world of Houses of Multiple Occupation (HMOs), and the investment opportunities they can offer.
Five reasons why HMOs may be a good investment opportunity for residential property investors in 2023
- High demand: HMOs are in high demand, especially in urban areas where the cost of living is high. With the rising cost of housing, more people are looking for more affordable options, making HMOs a popular choice.
- Higher returns: Because HMOs can be rented to multiple tenants, they often have higher rental returns than traditional single-family or buy-to-let properties. This can make them a more profitable investment.
- Flexibility: HMOs offer flexibility in terms of the type of tenants you can rent to. You can choose to rent to students, professionals, or a combination of both. This can help you to diversify your portfolio and ultimately reduce risk.
- Reduced Risk: Whilst we're covering reducing risks; well-managed, quality HMOs can provide a stable income stream for property developers. The tenants in HMOs tend to be more stable compared to traditional buy-to-let tenants, reducing the risk of rent arrears and void periods.
- Potential for renovations: Many HMOs are older properties that may need renovations. As an investor, you can take advantage of this opportunity by making renovations and increasing the value of the property.
🚀 Matt Baker from The HMO Platform recently joined us to explore how savvy property investors should be taking advantage of the HMO marketplace in 2023. Watch the on-demand webinar here.
Overall, HMOs can be a lucrative investment opportunity for residential investors in 2023. With high demand and the potential for higher returns, they are worth exploring as an addition to your existing portfolio.
However, there are some challenges that property developers should be aware of when considering HMOs. These include:
- Higher maintenance and management costs: HMOs often require more maintenance and upkeep due to the shared amenities and higher foot traffic. This can result in higher management costs.
- Planning and regulatory issues: HMOs may be subject to specific planning and regulatory requirements, depending on the location of the property. It's important for developers to understand and comply with these requirements to avoid potential legal issues.
- Financing: Some banks may be hesitant to lend to developers for HMO projects due to the perceived risk. Developers may need to seek alternative financing options, such as private lenders or crowdfunding platforms.
⚡Pro-tip: It's important to do your due diligence when looking for HMOs to invest in. Be sure to carefully review the property, assess its condition, and consider any potential renovations or repairs that may be needed.
How to find the best HMOs with Nimbus 🏠
Ready to dive into the world of HMOs? Enter Nimbus Maps - the solution you've been searching for 👋
Carry out your research and find the perfect location with plenty of demand and potential to stand out from the competition with our intuitive platform.
[Pictured: HMO pre-defined strategy highlighting Residential (c3) conversion to HMO]
With new and exciting features, finding the perfect HMO property has never been easier. Using cutting-edge technology, Nimbus Maps highlights every licensed HMO on a map, giving you all the information you need in one place. See the licence holder, the number of persons the property is licensed for, and more.
Not only that, but the map also colour-codes all residential properties that could potentially be converted into HMOs, taking Article 4 restrictions into account. Want to know which existing HMOs have the most potential for development? Nimbus Maps has you covered with its innovative new feature that highlights the best HMO opportunities in your targeted area.
With the ability to show title deeds, current ownership, detailed plot borders, building footprints, and previous planning application details, you can quickly identify properties with the potential for development.
⚡ Make informed decisions and find the perfect HMO property with these top tips:
- Article 4: Keep in mind that many local authorities have introduced Article 4 protocols for HMOs, which means the property must comply with particular criteria such as the density of HMOs around a new proposed HMO, allowance for parking and cycle storage and minimum bedroom sizes before it can be rented out.
- Properties: Properties with the most potential for conversion tend to be inner-city Victorian townhouses with large bedrooms, rear access, high-pitched gables for loft conversion, and space for extension. Get the most out of your HMO investment by focusing on these types of properties.
At Nimbus Maps, we've done most of the hard work for you, with expert advice available and a pre-defined strategy built directly into our platform with four exclusive features that highlight opportunities to help you identify and assess the best HMO sites available to you.
Feel free to explore our HMO package aimed at developers looking to explore this lucrative world or start your free trial of Nimbus Maps today and start exploring potential sites for HMOs now.
