Property Investment

Why do people invest in a HMO properties

By January 4, 2020 No Comments

So with the myths cast aside, here’s why I think HMO properties are such a great investment for anyone seeking financial freedom:

It’s a huge growth market. We’re in the grip of a housing crisis in the UK, and the government is actively promoting communal living as a way for people to find and afford a place to live. Not only that, but recent changes to the housing benefit rules mean that single people under 35 years old are only entitled to a room in a shared house – pushing tens of thousands more people into the HMO market.

People are looking for a cost-effective solution to their housing needs. In every part of the market from people on benefits to highly paid professionals, people want quality shared housing. Unlike when anyone could get a 100% mortgage to buy their own flat, the mindset is shifting towards living with others – but they won’t settle for shoddy standards. The demand is huge for anyone with a quality product.

HMO properties generate large amounts of cash. You’ll make drastically more money from a well-chosen HMO property than you ever could for a single let. That means you can pocket the money to live on, save it to quickly reinvest in another property, or overpay your mortgage so you’ve got an unencumbered asset as your pension for when you retire.

You can stop worrying about what’s going to happen to property prices. If the capital value improves that’s a bonus, but who really cares when you’re generating money every month? You’re making your profit now, rather than waiting for a possible payout sometime in the future.

You’re at less risk from voids and non-payment of rent. People struggle to get their heads around this one, because more tenants equals more risk in many people’s minds. But the way I see it, if you’ve got one tenant in a house of five paying you late, you’ve still got 80% of your income on time. If one family living in a five bedroom house decide not to pay you one month, you’ve got nothing. With an HMO property, even if there’s one problem tenant you know you can still cover your mortgage and bills from the remaining rental income, and not have to service the bills and mortgage from your own pocket.

HMO properties offer a lot of personal freedom. Because you’re making a large amount of profit from one property, you’re not constantly chasing around all over town doing viewings, making repairs and solving problems at multiple different addresses. You can work from home, and there’ll be weeks on end where you’ll never hear from any of your tenants – if you’ve been smart and set things up properly, that is.

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