Mistakes HMO investors should avoid
HMO’s give fantastic returns on investments due to the high rental yield returns associated. This is why they are becoming more popular year on year. But you'd be wrong if you think all HMOs are lucrative. In pursuit of higher returns, investors can make some common mistakes that could increase risk and reduce profitability. Here's a list of mistakes you should be aware of to reduce your risk and maximise your ROI.
1) ‘Waiting for the right time’ to invest in HMOs.
In most areas property prices have gone up faster than the average wage. And one of the biggest mistakes an investor can make is not investing and missing out on potential HMO goldmines.
2) Not understanding your competition.
You can stay one step ahead of your competition if you know what they are doing. Know what your rivals are doing with their properties to provide better quality services for your HMO that can lure more tenants. Generally, you can even charge a premium for those services.
3) Having poor HMO location
Not doing enough research can adversely affect the potential of your property. HMOs are profitable for most parts of cities and towns, but choosing the wrong street can cost you your tenants. Renters look for places close to public transport, student universities, offices, marketplaces, etc. Make sure you check for these features when buying your property.
4) Not hiring a suitable letting agent.
Make sure you get the right estate agent for you, especially if you are a newbie investor. Choose the right agent for your property who has experience of working in your area and with your chosen tenant profile.
5) Not doing the calculations.
Calculating your rental expenses and expected profits. Number-crunching might be time-consuming, but it can save you from making losses. Add all the expenses like insurance, maintenance, taxes, property manager expenses, etc.
Please pay attention to the cost of maintenance and renovation of your HMO, as highly maintained properties bring quality tenants. It is also common that HMO’s operating with less than five tenants are hardly ever profitable.
6) Do not mix tenants of different types and ages.
Working professionals, students, and DSS - choose one of the three groups of tenants. Try to avoid mixing different age groups as tenants of similar ages/interests work best.
7) Undercharging or overcharging rent
It's essential to know the worth of your HMO and the services you provide with it. Research your competition (single let and other HMOs) and set your rent charges accordingly.
Although HMO’s can be a good investment decisions, they can also be more challenging to maintain than a single let. Making them profitable requires more planning and research and that’s why we offer a compressive service to best suit your needs.
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