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How to Start Investing in HMOs: A guide for Residential Developers


How to invest in Housing of Multiple Occupation (HMOs) 🏘

As the demand for affordable and flexible accommodation continues to rise, investing in HMOs remains a lucrative opportunity for property developers looking to diversify their portfolio. In 2023, yields of up to 14% are still achievable, making it a highly attractive market for seasoned investors and entrepreneurial-minded individuals alike.

Town centres across the UK have already benefitted from entrepreneurial-minded folk taking the plunge into this exciting opportunity to maximise returns. Needless to say; identifying these properties for HMO conversion has not always been the easiest, that was before the latest update to the Nimbus platform.

The team at Nimbus has strived to support thousands of property professionals across the country in identifying their next project undertaking. Many commercial and residential projects have seen the light of day as a direct result of the versatility and transparency of the Nimbus platform. A recent House of Commons briefing paper on HMOs stated that across England and Wales, there were 497,000 House of Multiple Occupancy existing by March 2018, with this only set to grow in the coming years. As a result, the wheel was quickly put in motion to support Nimbus customers with HMO tools to source the best acquisitions.

One of the most popular features for Investing in HMOs is the ability to apply ‘Overlays’ to the maps offering key geographic boundaries to such points of interest as flooding areas, greenbelts and local council jurisdictions. The same functionality was applied to the HMO market with an overlay showing across the UK all registered HMOs.

Benefits when sourcing an HMO

  • Competition - The density or sparsity could indicate whether the area has a high/low demand for HMOs
  • Condition - The retrospective street view function applied with previous sales information will determine if a landlord could be willing to sell. This is because if the aesthetics have declined on the building envelope with no obvious signs of the current owner reinvesting into the property, they could be open to off-loading this from their portfolio
  • Ownership - Nimbus allows you to see the title deeds and details of who owns a property or site so you can send a letter directly to the owner making the process of purchase negotiation much quicker.
  • Expansion - Assessments can be made easily by seeing the building marked clearly with its title boundaries and comparisons can be made if extended the property (increase profitability) with its neighbours.
  • Licensing - The HMO overlay has the ability to show if an HMO is licensed or a previous license has been applied for making the decision-making process more transparent.

Are HMOs still a viable option for developers and investors in 2023?

The UK private rental and HMO sectors have witnessed significant growth over the last decade due to affordability issues arising from the increase in house prices that have outperformed wage growth. The average house price now stands at £290,000, and first-time buyers require a deposit of around £43,500 (15%) to acquire a suitable mortgage, whereas average salaries are only at £29,600. 

For many people who are not on the property ladder, rental is the only option. This factor paired with the growing apathy towards house ownership among 21–35 year-olds and the Goverments' targets to building 345,000 new homes each year not being met, there is an essential need for HMO and PRS housing, which both investors and local authorities recognise.

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