The UK housing market has been in flux for a while now. However, one thing that seems to never change is the demand for accommodation and more specifically HMO’s in the UK. Many people are continuously looking to invest their hard-earned money in this sector because of its stability and high levels of rental income. As a general rule of thumb, ‘the uglier the building, the better’. However purchasing old, dilapidated buildings means refurbishments are non-negotiable. But before you jump into buying an HMO property refurbishment, it’s important that you have the end goal in mind and know what you’re getting into!
If you're thinking about buying a property that needs refurbishing, there are a few things you should know before taking on the project. Here's everything you need to know about a HMO refurb!
An HMO (house in multiple occupation) is a type of property that is typically rented out to multiple tenants, often students or young professionals. In order to be classified as an HMO, the property must have at least three tenants living in it who are not from the same household.
2. What does it mean if a property is "in need of refurbishment"?
This simply means that the property is not in its best condition and would benefit from some renovations or repairs. It's important to note that properties in need of refurbishment can vary greatly in terms of the scope and cost of the work required.
3. Why might someone want to buy an HMO that needs refurbishing?
There are a few reasons why someone might want to buy an HMO that needs work doing:
- The property may be significantly cheaper than similar properties that don't require any work. This can give you a great opportunity to get onto the property ladder and produce some serious cash flow.
- The scope for profit may be greater than a turn-key property. If you're planning to refurbish and do the works yourself than there generally always a greater profit margin.
The Costs Involved in HMO Properties
Before you buy an HMO property, it's important to be aware of the costs involved in refurbishing and maintaining the property. Here are some things to consider:
-The cost of the property itself. Turn-key HMO properties can be expensive, so make sure you have the budget to cover the purchase price. Alternatively, we find it’s always cheaper to do the conversion yourself (or find someone who can, wink wink 😉)
-The cost of any necessary repairs or renovations. If the property needs work before it can be rented out, you'll need to factor in the cost of materials and labour.
The cost of bills. The landlord typically covers all bills for a HMO. This includes utilities, council tax, wifi and water rates.
-The cost of furnishing and equipping the property. You'll need to provide furniture, appliances, and other essentials for your tenants.
-The cost of ongoing maintenance and repairs. As a landlord, you're responsible for keeping the property in good condition. This includes paying for regular cleaning, repairs, and upkeep.
-The cost of insurance. It's important to insure your HMO property against damage and liability risks.
The Risks of Investing in HMO Properties
There are a few risks to take into account when investing in an HMO property. The first is that you may have to deal with difficult tenants. This can be challenging, as you will need to manage the property and deal with any issues that arise. We recommend always employing a trusted agent who has a thorough tenancy vetting process. At the end of your day, you don’t need another job managing the property! Additionally, HMOs can be expensive to maintain and refurbish, so you will need to factor this into your budget. Finally, there is always the risk that the property could become vacant, which would mean you would have to cover void periods.
5 things you need to keep in mind when doing a HMO refurb.
1. Know your regulations - Minimum room sizes, fire safety governance and building regulations all need to be compliant. Not following these regulations can result in the HMO license application being refused by the local council.
2. Employ trusted tradesmen. An untrustworthy electrician or bricklayer can not only set the project back months but can also incur unnecessary costs. Ensure any tradesman on the project has had numerous reference checks and has been thoroughly vetted.
3. Know you’re figures - the total amount of the refurbishment should be agreed before works begin. Be meticulous to ensure this covers all aspects of the project so that there’s no room for extra charges.
4. Ensure the spec is correct - not all areas require the same spec. Central London will demand a different standard to Burnley. Even though you want your rooms to be as attractive as possible and charge the highest amount of rent, every area still has a ceiling.
5. Time is money - every week the property isn’t tenanted is a week you aren’t receiving rent. Stay on top of the project by having weekly site visits and check ins to ensure builders stay on task and works don’t stall. Also have timeframes and a schedule of works agreed before works commence!
If you're thinking about buying a property to refurbish and rent out as an HMO, there are a few things you need to know before making the purchase. First, make sure you understand the local regulations regarding HMOs so that you can be sure your property will meet all the requirements. Second, be realistic about the amount of work required to get the property up to scratch - it's not going to be a quick or easy process. And finally, factor in the potential rental income when making your decision - if done right, an HMO can provide a great return on investment.
