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How to find the best HMOs?

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Want to find the best HMO?

It would be fair to say that property investors are motivated by decent returns on their investments and this is no different in the buy-to-let (BTL) market. For a while it seemed like every person and their dog with a comfortable financial standing wanted to invest in BTL’s. This was all the motivation needed to exceed the standard yields of 6% on a two-up, two down for serious professional property investors. As the housing crisis continues and the average first-time buyer has reached the all time high of 32 years old, more tenants are looking now than ever with fewer affordable rental properties available.

Houses of Multiple Occupancy (HMO) have significantly taken off with established BTL investors because of their high yields (typically 14%) and less competition from the bulk of the market. Finding the best HMOs are normally positioned in Town or City Centre locations, they offer a healthy balance of affordable living and doorstep amenities. The focus on location and the properties themselves being suitable for conversion to HMO can be challenging, however here are some expert tips to increase your chances of sourcing an ideal prospect in a desirable location:

Is there a demand?

Market research is essential to buying any property or investment opportunity, you need to be certain there are tenants available to rent the beautiful rooms you are willing to provide. Experienced HMO investors have been quicker to establish properties in some areas than others. The most important ratio to establish for demand is Rooms:Tenants. Are there too many rooms available in comparison to the number of tenants looking? Or is there a high number of tenants searching but not enough rooms available. If it is the latter, then demand outweighs supply, and this would indicate a good area to invest. ‘Sparerooms.com’ is a great way of establishing the rooms:tenants ratio as it is displayed on every search.  Don’t forget to also log on to Nimbus Maps® to find the best HMO because the platform will display all the neighbouring registered HMOs.

What is your competition?

Competition is healthy in any walk of business, especially for Houses of Multiple Occupancy. Establishing the quality of offering in your chosen area can determine a gap in the market unforeseen by your competitors. For example:

  • Are the other HMOs well maintained?
  • Does the interior design offer something more than magnolia walls?
  • Are the social areas (if any) inviting and create a positive ambience?
  • Is the location suitable for transport links and local amenities?
  • Are their enough utilities and appliances like washing machines, shower rooms, ovens, cupboard space?
  • Is there any outside space or garden?
  • Does the property offer WiFi and a place to watch TV?

If the answer is no to any of these questions, then there is a strong possibility you have an opportunity to offer a better product and attract more tenants than your competitors.

The higher the standard you set on the overall image and facilities available of your HMO then the more likely your rooms will be priority for any tenant looking to find a new home. Not only that, if you offer a fully equipped, premium HMO your tenants are likely to stay with you for longer.

How will you find the right property?

So, you’ve done your research and you’re confident you’ve found the right area where there is demand and an opportunity to stand out from the competition. How do you find the right property?

Nimbus Maps® have just launched new features to highlight every licensed HMO on a map with the ability to zoom in and see the licence holder and number of persons the property is licensed for. An additional feature colour codes all residential properties that might be suitable for conversion to HMO taking article 4 restrictions into consideration. Another innovative new feature colour codes all existing HMOs to highlight those with the most potential for development when compared to other HMOs on the same street.

This unique tool shines a light on the density or sparsity of of the best HMO opportunities in a targeted area and has the capability to show title deeds and current ownership of the buildings as well as detailed plot borders and building footprints with previous planning application details allowing users to quickly identify properties with potential for development.

Top Tips

  • Many local authorities have introduced Article 4 protocols for HMOs in their areas of jurisdiction meaning that the property will have to comply and be licenced before it can be let out. Article 4 enforces things like fire safety and minimum bedroom sizes.
  • Traditionally the best type of properties for conversion tend to be inner city areas with large Victorian townhouses that were built with large bedrooms, rear access, high pitched gables (for loft conversion) and space on the rear elevation for extending to maximise profits.

If you have enjoyed this article and wish to know more about how to find the best HMO through Nimbus Maps, click here

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