Can you make extra money for your family with an HMO?
If you have an HMO (Houses of Multiple Occupancy, also known as house shares) or are planning to buy one or convert an existing property, what do you need to do to be successful? Is there evidence to suggest that the HMO route will be a good way to be in the property market for the foreseeable future and help you support your family financially?
Let me start by dispelling some of the myths about HMOs to help you get clarity on whether an HMO is the right way to go for you and your family.
- House sharing won’t be what people want after Covid-19
Although this may seem like common sense, it’s not quite that clear-cut. In our experience, even during the current pandemic, people are continuing to choose to move into HMOs.
Most of our young professional housemates that I rent to could easily afford a one-bed flat, but they tell me they prefer living in a house share. Their reasons include being able to meet new people, make friends and have a ready-made social life, particularly in a new city. Affordability, convenience, and the flexibility of making a short-term commitment are also important.
This means that we’re seeing the demand for HMOs increasing rather than decreasing.
- HMOs demand will take a nose-dive if we have a recession
If we are heading for the market dip many financial commentators are forecasting, then it’s likely demand for HMOs will grow, as past evidence has shown that residential rental demand increases in recessions. More people prefer to rent rather than buy in recessions.
In 2017 home ownership in England was at a 30 year low according to the English Housing Survey, the lowest since 1935.
Research by the Royal Institute of Chartered Surveyors showed that after the 2008 recession there was a continued rise in tenant demand.
So, although many people state that getting into rental in a recession is bad, they are wrong. Recessions see growing demand for rental property and especially affordable rental property, such as HMOs.
- This is a saturated market for landlords
There is a shortfall in affordable housing. A National Housing Federation and Crisis report conducted by Heriot-Watt University reveals that the UK needs to build 340,000 new homes every year until 2031 to meet housing demand. And at least 145,000 of those homes need to be what’s termed ‘affordable’.
Tthere is strong demand for affordable housing – and house building is not keeping up. Which means HMOs are becoming ever more popular.
In 2018 the UK Government estimated that there are around 4.5 million people in England housed in around 497,000 HMOs in England and Wales. It’s therefore easy to see how HMOs can contribute towards alleviating the housing shortage. However, many councils have introduced Article 4. This means that a planning application has to be submitted to the relevant council to change a house to an HMO, even if it will only house for 3 or 4 people, which under the national legislation wouldn’t require planning permission.
It is therefore is becoming more difficult for landlords to create a new HMO. So, the number of available HMOs is not growing as fast as it used to, and yet demand is on the increase.
In my experience, the people claiming the HMO market is saturated have sub-standard properties in the wrong areas or don’t have any HMOs at all – just unsubstantiated opinion! To me, it is clear that the HMO market is buoyant not saturated.
If you already have an HMO or are considering converting a property or investing in one, what can you do, as a busy parent, to make the most of the opportunity?
Here are four little ways you can use your homemaking skills to make a big difference to your house sharing tenants.
- Create a ‘work from home space’
Now that people are more likely to be working from home, having a desk, an attractive work area and fast broadband is important. If necessary ask an electrician to add a few extra sockets if needed so laptops, phones and other work paraphernalia can be plugged in and kept charged.
- Plenty of kitchen storage
Ensure there are enough kitchen units to provide suitable storage and include a fridge and freezer. It’s surprising how many landlords don’t supply enough kitchen cupboard space. So, if your kitchen is small, look at clever ways to maximise the storage space – there are loads of ideas from places like the NRLA and IKEA. Thinking about the little things that make life easier can make a huge difference to your tenants.
3) Fit in extra wardrobes
While you can’t change the size of a house without major works, you can increase the storage and make it feel more spacious. Simple fixes like having two wardrobes, or adding shelving (for example, above doorways can be a great way to add a bit of extra storage space) can make a big difference. No one wants all their ‘stuff’ on display, so provide somewhere for them to tidy it away.
- Top quality service
This is the one that will make your properties stand out. From the first viewing to moving in, be proactive and attentive. Show your tenants you care about giving them a great place to live. Once they have moved in, don’t think that’s your job done! Look after them, make the experience of living in your property one they will remember and cherish. This helps housemates stay longer and also leads to more referrals.
It’s well worth putting yourself in your potential tenants’ shoes and creating an HMO that will work well. You’ll create a home from home for them and your family will benefit from your profitable HMO business.
ABOUT THE AUTHOR
Stephanie Taylor is Co-Founder of HMO Heaven and Rent 2 Rent Success. She started HMO Heaven along with her sister Nicky and has grown the property management business to contracts of over £2m in just three years. Her goal is to inspire others to believe bigger, be bolder and be gamechangers for good through the power of ethical property businesses. Her focus is on using property to do good in our community and in the world.