It’s a question of balance. When we’re looking at HMO property we are always on the lookout for houses of between four and six bedrooms. Of course how many bedrooms you should be looking for depends on your strategy. HMOs provide great rental yields and of course the more bedrooms you have the greater the rental yield. Too few rooms and you might not be able to cover the costs but too many, in the wrong location, and the property might be difficult to manage or fill.
[0.18] Between 4 and 6 bedrooms
[0.35] Letting agents and rental yields
[2.02] Going too large
[2.12] Putting it all together
[2.38] Join our FREE training
Today we’re going to be looking at bedrooms and more specifically how many bedrooms should you be aiming for in your next HMO property (house in multiple occupancy).
How Many Bedrooms Do We Look For?
When we are looking for HMOs for our clients we usually look for properties that have between four to six bedrooms.
Now, some of the investors we have worked with have had three bedroom HMOs and these properties have worked great for them. However, we (and the majority of our clients as well), tend to look at HMOs purely on a rental yield basis and this element alone goes a long way to dictating the locations in which we invest.
An HMO refurbishment by Property Investments UK and Client
Rental Yields Vs. Covering Your Costs
Most of our clients are not looking to be hands on with their HMO investments. This means that they hire letting agents who manage the properties that they own. Because using letting agents means higher running costs, they need to make sure that they have as much rental income coming from the property as possible.
With a three bedroom HMO, it can be quite difficult to cover these running costs and still turn a profit. But, if you’re a hands-on investor, looking to self-manage your HMO then ultimately it’s doable and might give you a better income than you would get out of a straightforward buy to let.
However, if what you want is for a letting agent to manage the property for you then in most cases you are going to want a property that has four or more bedrooms. This is really the only way that you can guarantee an income after your costs have been covered.
HMO Property: Location
One of the main reasons that investors put their money into HMOs is because of the level of cash flow and rental yield that these properties generate.
But, you need to take into account whether or not you are going to be able to find properties in the locations where they are going to rent out. That’s to say you have to think about the amount of available housing stock that you are going to have to play with.
That’s why we say between four to six bedrooms. Because ultimately that’s the sweet spot. You need to find the right location, with the right price range for a property, where the yield or return on your investment is as you want it to be.
As the number of bedrooms increases in that scale – so to five or six bedrooms – then your returns typically will increase quite significantly. It’s like a hockey stick effect.
Going Too Large
When considering how many bedrooms you want in a house in multiple occupancy, there is such a thing as aiming for too many. Four bedrooms can, however, work quite well. Also, what we tend to find in the locations we cover, is that if we go too large with HMOs they can end up being difficult to manage and difficult to fill.
So again, we try to strike a balance and recommend the four to six bedroom mark for your HMO investment.
Putting It All Together
Hopefully, this gives you a bit more of an idea as to what to aim for when you’re looking for your next HMO property.
The issues might be area specific. You might be looking in a location that can withstand a very large HMO. Of course, this comes down to research. I’ve included a few links below on this and a few other topics. We also cover location research in our property training course that you can try out today for just £9.99.
- Don’t Make These 5 Critical Mistakes When Investing in HMOs
- 4 Unbeatable Tips For Adding Value To An HMO Property
- The Secret to Choosing The Area When Investing in Property
- Using Rightmove and Zoopla to Calculate Rental Demand
- 4 Ways to Simplify Your Next Buy to Let Investment
- HMO Casestudy: Which HMO Strategy Gives The Best Returns?
- How To Use Google Chrome To Track Property On Rightmove
Join Our FREE Training Today
Thank you for watching this video. If you liked this content then why not join our free online property training course? In there we cover a range of different property strategies to help you get started on building a long-term property portfolio or creating a cash flowing property business. We also look at ways to increase your return on investment with any of the properties you may be considering and we also have a couple of cheat sheets and downloadable documents. Just click the image below to join our free training course.
If you have any questions or thoughts you’d like to share on how many bedrooms you want in an HMO property then please leave them in the comments section below. We’d love to hear from you and we’re always happy to help.