Given the demand for rental property, it is no surprise that many people consider the benefits of running a HMO business. It is possible to enjoy fantastic returns in this market but equally, a lot of challenging work, effort and money needs to be spent and undertaken in the pursuit of success. If you are keen to learn how to run a successful HMO business, let Homesforte provide you with insight and guidance.
Size matters in running a successful HMO business
If you are looking to run a successful HMO business, you must consider size. This will differ for every professional, but it is a promising idea to have a collection of tenants which allows you to share costs across. You want to ensure that you don’t take on too many tenants, stretching yourself too thinly and causing problems, but if you can find a level that you can manage which allows you to enjoy profit, you are doing well.
Although each property and HMO is different, many professionals see five tenants as the ideal starting point. When you have three or four tenants in place, you can comfortably over electricity, gas, council tax and water rates, but when you have five or six tenants in place, you start to make a notable level of profit each month. If you have more than six tenants, the property can start to feel like a hostel, which can create other problems.
Your location is essential
As with virtually everything in the property market, the location of the property is essential. Again, every HMO is different but as a rule of thumb, it is bets to be with a simple (say around 10 to 15 minutes) walk from the town or city centre. Findings suggest that two-thirds of HMO tenants don’t have access to a car, so they are looking for a location that allows them to walk to where they need to be or have access to affordable public transport.
Therefore, finding location close to a town or city centre or a major employment centre is a smart starting point for running a successful HMO business.
Know your tenants and group them together
One of the best things about the HMO market is that there are diverse types of groups looking for HMO solutions, including:
- Local Housing Association tenants
While it is pleasing to have distinct groups to aim at, it is advised to stick with one group per property. Mixing people from diverse groups increases the likelihood of issues arising, making your life more challenging that it would be if the tenants had common interests.
You should look to create a sense of community within the HMO and this is much easier when the group has common interests.
Know what yield you need to earn to be a success
The return you receive from your HMO is the most important aspect and this should be at the forefront of your thoughts from the very start. You should carry out research on the expected return from property types, from locations and from tenant types. When you are aware of these returns, you can make a more informed decision as to what is the best choice for your need.
Make sure that you are comfortable with the return you receive but many find that a return of around 12% to 15% is an effective starting point.
Hire a cleaner
To provide the best standard of service to your tenants, you want to provide a clean-living environment. It is likely that tenants will disagree about who should clean what, so hiring a cleaner to carry out work in the shared areas can make for a cleaner living environment and a more harmonious living area.
The cleaner can also act as an informant relating to the property, advising of any potential issues that you should be aware of. The cleaner can also carry out alarm tests and any other regulatory issues that need to be taken care of.
If you follow these steps, you will increase your chances of running a successful HMO business. There is a great deal to be said for obtaining help and guidance when you can and at Homesforte, we are always happy to assist you, so please get in touch.
Categorised in: GUIDES