Please Note: This Article is 5 years old. This increases the likelihood that some or all of it's content is now outdated.

If you’re a serious property developer, you may be considering getting into HMO (House of Multiple Occupancy) development. There are a number of benefits to doing so – not least the opportunity to maximise ROI with a solid monthly rental yield from numerous occupants!

However, when considering HMO development, it’s important to be aware of some of the pitfalls. Developing a property for multiple occupancy is profitable, but not without its complications. Here’s a quick definition of an HMO, plus a brief guide, outlining the key ‘do’s’ and ‘don’ts’ associated with HMO property development.

What is an HMO?

An HMO is defined as:

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  • A property housing 3 or more people.
  • These people must be sharing a bathroom and kitchen for the property to be classified under this heading

A Brief Guide to Successful HMO Development

  • Do understand your responsibilities. If you’re creating an HMO, you’ll have certain responsibilities. Your first port-of-call should be with the local council, who will let you know if you need a licence, and also, who to contact regarding fire safety regulations.
  • Don’t forget to check your property is compliant. Under the Housing Act 2004, councils can inspect your property – and it needs to be fully compliant in terms of health and safety. For more information, visit the Gov.uk site.
  • Do purchase wisely. When investing in a property, think like a tenant. Is it close to amenities and local attractions? Are there transport links close by? Does the property have kerb appeal? The more attractive your property to potential tenants, the more you’ll be able to charge in rent.
  • Don’t forget to think realistically. When viewing properties, think about how many tenants you can realistically offer accommodation to. For example, if the property has three reception rooms, you may be able to convert one into an extra bedroom. However, don’t skimp on communal space – tenants (even students) will expect some sort of living area!
  • Do think creatively. Don’t be put off by a property that’s in a poor state of repair – see it as an opportunity. Think about how you can sub-divide the space to maximise rental yield, or how you can present the property to appeal to tenants. Remember, cosmetic renovation shouldn’t be too expensive – though structural repair may well be.
  • Don’t go it alone. Searching for suitable properties on your own can be challenging, particularly if you don’t know the area very well. Hire the help of a local estate agency with excellent knowledge of the region – they’ll be able to advise you on the best places to search, and may even give you advance notice when a particularly good property is about to come to market.
  • Do consider your tenants. Think carefully about who you will be targeting. Students, for example, are likely to be looking for entirely different features to young professionals.
  • Don’t forget to research average rental yield. Treat your HMO development as a business opportunity, and do your homework first. Find out average rental rates in the area you’re interested in, then work out what you (or the prospective landlord if you’re selling the property) could earn per month.

Working with a Local Estate Agent

As with any form of major investment, it pays to do your homework. An estate agent can not only help with initial research and property search, but may also work with you to develop the property – making it as attractive as possible to tenants.

If you’d like to find out more about how Cairn Estate Agents can help you, simply get in touch by calling 0141 270 7878/9 today.

Article Courtesy of: David Rowand of Cairn Estate Agency

Please Note: This Article is 5 years old. This increases the likelihood that some or all of it's content is now outdated.
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