HMO’s not only produce a higher income than on the same property as a Single let, but also has the ability to be valued on its income, known as yield or income stream. So this adds a further advantage to the traditional ‘brick and mortar’ value. When using the yield system, you are entering the world of commercial lenders and valuers.
HMO’s and Multi lets?
Lenders view these differently, for Housing Act purposes, property occupied by 3 un related people sharing one property, is classed as a HMO. Some HMO’s require a HMO license.
What to look for when buying a HMO;
Professionals are the best tenants for HMO’s, easiest and best to deal with, but depends very much on Location, Location,Location…..look for City Centre properties and good transport links.
Other than buying outright, you can obtain a HMO through Lease option; offer the owner a long-term rental, say 5 years and include the right to buy. Calculate what it will cost to divide up the property into ‘rentable rooms’. What rental income can you obtain.
Listen to the prospective vendor, negotiate, you are there to offer him a deal whereby you are both in a win/win situation.
When looking for HMO’s, look out for neglected properties – who owns them, what is their history.
Properties that have been on the market for a long time – work out how much x how much mortgage paid by owner during that time. They could be a desperate ‘motivated’ seller.