There are various ways for investors to own a HMO. In this guide, we will be discussing the two main options to owning a shared accommodation property and the pros and cons of both.
What is a HMO?
HMO (Houses of Multiple Occupation) is where 3 or more unrelated tenants live in one household sharing facilities such as bathrooms and kitchens. HMO tenants pay a premium rate per the room which produce higher cashflow.
What is the difference between a turnkey HMO and a HMO Conversion?
A turnkey HMO is a fully renovated HMO property, usually with tenants in situ, that an investor can purchase and immediately rent out.
A HMO Conversion is where a standard residential property (C3 status) is legally changed and cover free to House of Multiple Occupation (C4 status) in order for 3 or more unrelated tenants to live in.
In both of these instances there are HMO standards that must be met depending on the local councils standards and the number of occupants. Some of these standards include: fire precautions, adequate kitchen size, number of bathrooms and adequate communal space available for tenants. However, this does not mean you should assume turnkey HMO’s have accurately followed all of the required regulations.
A turnkey HMO is an easy, stress-free option which allows investors to begin making a return almost immediately. These benefits do come at an increased initial investment because the work has already been done for the investor which results in a premium being added to the purchase price. For example, buying a pre-cut pineapple from the supermarket has a premium price compared with purchasing a whole pineapple.
A HMO conversion provides the opportunity for investors to benefit from the increased end valuation and higher cashflow from tailoring the property to the tenant type. Although it comes with the hard work of funding and managing the renovations, complying to the local regulations and licensing the property, the landlords return on investment is far greater as they benefit directly from the uplift in value of the property post refurbishment. They also have longevity in the property as they directly oversaw the build works.
At Parata Property we source and project manage HMO conversions for you so you can still benefit from increased property values as well as increased cashflow. By using our trusted surveyors, building team, solicitors and estate agents we are able to provide our clients with great returns for a fraction of the cost.
Head over to our Instagram to check out our latest HMO conversion, Project Bank!
