A new report from Shawbrook Bank confirms that HMO's are evolving into a mainstream property investment model. Two factors combine to make HMO investment both exciting and lucrative:
- Financial pressures make it difficult for people to start on the property ladder, whereas HMO renting (and sharing living amenities) is a lower outgo
- Young professionals prefer renting, like the lifestyle that HMO living offers and helps them to become responsible from an early age
The specialist commercial lender’s research reports that: ‘…with a generation of young professionals focused more on renting, due (in part) to house prices but also due to the desirability of higher levels of disposable income, shared accommodation is highly appealing for this demographic for both financial and social reasons.’
Karen Bennett from Shawbrook Bank tells Buy Association that “landlords talk about creating a community of young professionals who actually want to cohabitate, because it’s more sociable and enjoyable.”
A survey involving 10,000 tenants living in shared accommodation discovered that:
- 70% tenants are aged under 30 years
- Over 50% tenants are not in relationships
In addition, the statistics show that returns from HMOs constantly outperform standard buy-to-let property investments.
David Whittaker of Mortgages for Business says: “Our Complex Buy-to-Let Index has been tracking gross rental yields across a variety of property types for the past five years. In that time HMOs have consistently outperformed both vanilla buy-to-lets and blocks of flats, owned on a single freehold title yielding an average of 10% per annum compared to 6% and 7% respectively.” HMO properties that stand out from the crowd
With more HMO property conversion and investment taking place, the market is becoming competitive. Landlords must ensure that their rooms are appealing to tenants. Emma Cox from Shawbrook Bank comments, “These enhancements take the shape of very high quality finishes, wireless access, and flat screen TVs, in fact anything that gives them an edge in attracting the desired tenant profile”.
Martin Roche from HMO Property Sourcing agrees with this approach. He explains: “We are careful to provide a high standard of finish, fixtures and fittings within all of our HMO properties. It helps us to attract – and keep – professional, credible tenants for our landlords.”
The trends within the property market and potential tenants show that HMOs are growing in popularity – with investors (armchair and active) and tenants alike.
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