5 Reasons You Should Upgrade Your Rental Portfolio with HMO Properties
Have you considered adding an HMO (House in Multiple Occupations) to your property portfolio? If you have a piece of property that you are having issues in finding tenants for, it might be a good idea in turning it into an HMO. HMOs have been becoming very popular in the housing market over the past year. But what are the benefits of turning your piece of property into an HMO? If you are unsure what they are, don’t worry. Here are some of the reasons why you should have HMOs in your rental portfolio today.
Potential for Higher Income
The main attraction of HMOs is that rental yields can be up to 20% higher than for a typical rental property. Each tenant brings in separate income. However, costs are also likely to be higher.
There are a few factors you should consider before looking into HMOs. These include whether you need an HMO licence, the price of carrying out work to make the property compliant and higher maintenance costs due to increased usage and tenant turnover.
These can have an impact on your overall income return, but by managing costs carefully and taking advice from a specialist HMO mortgage broker you’ll give yourself the best chance to maximise your return on investment.
Fewer Rental Income Gaps
Letting each room individually in an HMO property means there’ll be less of an impact on your rental income when a tenant moves out because you’ll still have other tenants renting.
Although there is generally more paperwork with HMOs, careful investigation at the start of each tenancy will mean you can benefit from longer-term occupancy and a steady income stream.
Less Likely to be in Arrears
Having multiple tenants within the same property means you will have multiple streams of income, as each tenant pays rent for their individual room. This is beneficial as you’ll be less exposed if one of the tenants falls behind with their rent.
More Attractive Tax Position
Unlike the majority of single-let properties, you can claim a tax deduction on qualifying items within the communal areas of HMOs.
A proportion of these costs are treated as an expense of the rental business. One advantage of making a capital allowances claim is that if this results in a ‘rental loss’, it can be offset against non-property income and potentially add up to a significant amount.
It’s important to take proper HMO advice from a professional tax specialist in relation to your individual circumstances.
Growing Demand for Flexible, Affordable Housing
The private rented sector accounts for one-fifth of all homes in Great Britain. It’s popular with students, young professionals and single people. It’s expected that the demand for room rentals will grow as people opt for the attractions of community living. HMOs are great for fulfilling needs for flexible, affordable living that reflects a modern way of life.
With rising costs of living and a growing population, more and more people are looking for more affordable ways to live so keeping rentals at an affordable level for your target audience is important if you want to attract longer-term tenants rather than a series of short-term lets.
How We Can Help
Robert Manning aims to be one of the best HMO management agencies in Greater London. We have experienced providers of HMO and multi-let properties within London. This means we are experts in giving support while you turn your individual property into an HMO. Get in contact with one of our property management specialists today at 0203 725 8399 or contact us now.