There’s a common misconception in the property industry that, if you invest in a buy to let HMO, you are set to become a student landlord. While you can see a lot of financial success from investing in student accommodation, for certain investors, it can sound like the stuff as nightmares.
One of the things we like to do at The Heaton Group is to try to understand our customers and whether being a student landlord is a genuine concern. One type of investor, let’s call him Ian, might be looking to invest in a buy to let property and has heard about the kinds of returns that HMOs have to offer. Ian is sceptical, however, about the regular property maintenance and headache he thinks might come from renting to students.
Ian asks: "Do I Have to Rent To Students If I Invest In an HMO?"
Let’s answer Ian’s question…
Ian: Why is There a Misconception?
Answer: It all comes down to history…
The very definition of an HMO has many assuming that they’re geared towards students.
A house in multiple occupation (HMO) is most simply defined as a property that is rented by three or more tenants. These tenants live under one household and share the same facilities, such as a kitchen or a bathroom, but are not members of the same family.
So, you can see why the misconception has appeared and, on the whole, it’s not entirely incorrect. The vast majority of HMOs are currently student properties, located in student areas in university towns and cities.
Because of this, HMOs have been seen as basic accommodation for young adults who are happy living in communal, no-frills spaces. That’s the reason for this misunderstanding about what an HMO can be.
Ian: So, What’s Changed?
Answer: It all comes down to a change in culture...
Of course, we’re not saying that HMOs are no longer student accommodation. On the whole, they very much are. But your investment doesn’t have to abide by these parameters and for good reason.
These days, the line between young professionals and students has become finer. Gone are the days that you left university and went straight into work, setting yourself up to buy your first home and become a fully fledged member of the property ladder.
Due to a number of factors, including the rise in house prices, young professionals who have recently left university are more willing than ever to rent before with likeminded people before they buy. With this demand for rental properties comes a change in the way people live.
The rise of the millennial means that young professionals are more willing to accept, and even seek out, communal living spaces like HMOs. They aren’t as concerned with having to share spaces such as kitchens and bathrooms as previous generations and aren’t as quick to throw away a lifestyle reminiscent of their university days.
Ian: How Do I Set My HMO Up For Professionals?
Answer: That’s quite simple...
Due to the demand for communal living spaces, it’s easier than ever to target your HMO away from students towards a demographic that doesn’t send shivers up your spine.
One of the best ways to target your HMO at professionals, rather than students, is to invest in a property that’s built for them. What we mean by this is not all HMOs are created equal. Take our HMOs for example.
If you look at some examples of the HMOs we provide our investors, you’ll notice immediately that they aren’t targeted towards students. Here are a few examples of what a typical Heaton Group HMO includes:
- En-suite bathroom in every studio
- Kitchenette with a fridge, allowing tenants to store their own food and drink
- High specification finish (including high-quality features such as USB plugs)
Basically, investing in a Heaton Group HMO means you have a high-quality, high-demand property that requires minimum maintenance. Does this sound like a property geared towards students?
Ian: Are There Particular Regions I Should Invest In?
Answer: Actually, there are!
If you’re looking to target this specific demographic, made up of young professionals fresh out of university, you need to look at the figures to help you locate where they are.
The main number you need to look at, in this respect, is ‘graduate retention rate’. What this shows is the percentage of students who stay living and working in the area around their university after they’ve graduated. Essentially, this shows you which areas of the country sees its graduates staying on to start their working lives in the same area as their studies.
This is where you’ll find young professionals who are used to this kind of communal living environment looking for rental properties. Investing in an HMO in these areas
Want an example? Okay, Preston.
According to Centre for Cities, the City of Preston, and its surrounding universities, boasts a graduate retention rate of 22%. What this tells us is that there’s a great demand for rental properties in Preston and surrounding towns like Chorley and an investment in an HMO in this region might be exactly what you’re looking for.
Ian: What Are My Next Steps?
Answer: Contact us!
The Heaton Group are always looking for the best properties for our investors. That’s why we include a vast array of property types in our portfolio, including HMOs.
As mentioned, investing in an HMO can be a very lucrative venture by providing rental returns from multiple tenants that can add up to more than if the property was rented as a whole by one tenant. These benefits are only enhanced when you invest with The Heaton Group.
Every HMO investor who invests with us takes advantage of our 360 management service. This service only streamlines the process further for you as the landlord and all you have to think about is the finer details of your investment, rather than the worry of a hoard of messy adolescents living in squalor inside your property.
If you're still unsure whether any type of property is right for you, our free eBook, How to Invest in Property the Easy Way, shares the strategies for success you need to know and the pitfalls you need to avoid. Download now!