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Broadening Investment Property Options

Investment properties come in all shapes and sizes.  It stands to reason that the main consideration when contemplating purchasing an investment property is the likely return.  This can be tricky to forecast accurately as it depends on many things such as occupancy, desirability, age of property, maintenance, estate agent fees and of course the good old taxman!

A basic calculation for yield is the monthly rent times twelve divided by the purchase price.  The net yield is that figure, minus the costs associated with the points mentioned above.  This is the same whether it is one family renting a property or multiple occupants. Consequently, a house of multiple occupation stands to provide a greater yield than a single-family occupancy.

There are many different regulations covering letting an HMO compared to a standard residential property. Indeed, we have covered some of the latest changes here.  

House of Multiple Occupation Investment

Having an HMO in your portfolio comes with pros and cons.

  • Much higher yields – typically 15% compared to 5% average;
  • Slightly less risk of total tenant void.
  • Longevity of tennacy is shorter;
  • Landlord is responsible for utilities;
  • Maintenance can be higher;
  • Operational costs are increased due to legislation adherence.

Investment Opportunity in Smethwick

Our Hagley Road branch has this frankly vast property for sale in Smethwick.  With nine current bedrooms this house has great potential to be turned into a very lucrative HMO.  Bear in mind that you will need to obtain all the relevant planning and permissions in order to do so.  And, as mentioned in our HMO blog, modifaction works may to be required in order to comply with leglislation on the bathroom to occupant ratio.