Why are HMO investments better than conventional rent-outs?

Business TalkMarch 31, 202138 Comments01k

There are several modes of financial investments and you have multiple options in the real estate sector as well. Picking the correct one is important. From the investor’s point of view, real estate investments are much better than normal property rent-outs. Why is that so? Let us have a look.

1. Single Let and Multi Let difference

If you have a standard flat, it can only be rented out to one family or individual. This means that there will be only one source of income. In financial terms, this limits the money that comes your way. However, having an HMO property is very different. It allows you to rent each room/section out to a different individual. This means that the rental income will be generated according to the number of people living in the accommodation.

2. Unacceptable tenants are not expected.

It can be a troublesome situation for any property owner when he or she ends up with a hard-to-handle tenant. This is very normal because you cannot judge people when they bring in their suitcases. You only get to know the person when he or she starts living in your house.

In the case of HMO properties, you do not have uneducated people coming to live in the property. Instead, there are educated professionals who work in prestigious organizations or run their businesses. In this way, you can be sure that there would be no mishap. It is a fact that irritating tenants can ruin a lot of things for you.
Property damage is one of the major problems that take place. A tenant who is not sober enough to pay the rent on time can even damage your property if you send a polite reminder. This means sending him a notice to vacate and spending money on the renovation as well. For any property owner, this is a major problem to deal with.
HMO property owners do not end up with such issues. The reason being that people who select them mostly have a lot of decency. They have professional careers or businesses, and they take an HMO property to be located nearby. For instance, someone working in the city would want accommodation nearby even if his family home is located at a distance. This is where HMO homes prove to be helpful.

3. The yield of return is much better

There is no point in investing money when the returns are not good enough. A conventional property may offer returns depending on the location. However. HMO properties are much better when it comes to financial profits.

Following the recent surveys, they an incredibly right profit margin of 6%. People owning these properties earn a real good sum in the form of rent as rental incomes increase by a substantial margin every year.
A standard single-let property can be located anywhere and the rent depends on it. For instance, if a flat is located next to a factory, do not expect a lot of money to come your way. To start with, a lot of families would be prepared to shift in because of noise and potential health problems. In other words, you may be getting a very small rental sum even after spending tons of money on renovation and furnishing. The rental income will improve if you are in a better area.
HMO properties are mostly located in the center of the city which is why you do not have to worry about the rental income. The money is good, and you have high-standard tenants walking in.

4. One tenant walking away does not stop the income

What happens if things do not work out between you and your tenant? The answer to this question is very simple. He or she will walk out, and you would have to search for someone else. This means that your income will halt.

HMO properties are mostly multi-let in which means that several people are accommodated. Even if one of them walks off, you do not have to worry about the income stopping completely. The money will still be in a flow while you look for another tenant.

Summing it up

The money that comes your way does not depend on a single person. Secondly, you can be sure that only well-educated and civilized people will come your way. Lastly, the rental rates increase at a good margin annually.