HMOs tenants

HMOs in England now worth £26bn, but where are the hotspots?

The popularity of HMOs as an investment option has been on the rise in some areas of the country, and new research has pinpointed the top value areas for the asset class.

Houses in multiple occupation (HMOs) offer a range of benefits to property investors and buy-to-let landlords. For those looking to diversify away from simple buy-to-let, HMOs can provide stronger yields, fewer vacant periods and more surety of income.

Across England, the number of HMO properties in operation is now 55,849, according to data from Revolution Brokers. These are worth a combined total of £25.944bn to those who own them. Described as a “robust” sector in the current climate, some locations in particular are popular among owners.

Distribution across the nation

The figures show that London is home to the highest number of HMO rental properties, which unsurprisingly also hold by far the biggest collective value. There are currently 13,528 such homes in the capital, worth a total of £11.2bn. The average individual HMO price is £826,209.

The East Midlands, home to cities including Nottingham, Leicester and Lincoln, has the next highest share of HMOs, with 10,737 across the region – 19% of the national total. They are worth £2.9bn, and individually valued at an average of £274,126, with house prices there being drastically lower than London.

When looking solely at value, the south west of the country is home to the next-highest total price point after the capital, with £3.8bn of HMO stock. This is followed by the south east where it is £3.3bn.

Who’s living in HMOs?

The official definition of an HMO is a rental property that is occupied by three or more tenants who form more than one household, with shared facilities such as a toilet, bathroom or kitchen. There is also a ‘large HMO’, made up of at least five tenants.

Often, HMOs can attract younger, single people who want a cheaper option than renting a self-contained apartment for themselves, or want to benefit from the social aspect of sharing a home with others. Increasingly, young professionals are drawn to the property type after graduating.

Tenants can either agree to a joint or a sole tenancy. In a joint tenancy, everyone is liable for the rent, while in a sole one you are only responsible for yourself – if someone else doesn’t pay the rent or wants to move out, you are unaffected.

For landlords, sole tenancies can sometimes be preferable as it minimises void periods when you are not receiving rent, because tenants can come and go individually so you still have an income from the remaining ones. However, the downside is this can create more admin.

HMOs are often found in – or within easy reach of – cities, where tenants can easily reach places of work.

HMO portfolio is “robust”

Almas Uddin, founding director of Revolution Brokers, is optimistic about the future of the HMO space, despite it becoming subject to more regulations than ever in recent years.

“We’ve now started to see the HMO sector come under the same scrutiny as the wider buy-to-let space when it comes to a raft of new rules and regulations designed to improve tenant welfare,” said Uddin.

“While this is, of course, a step in the right direction, it means additional time and money spent by HMO providers to ensure they are operating above board.

“The worry is that these additional requirements may deter HMO investment and reduce the level of suitable HMOs that are available, leaving tenants with no choice but to rent from those who were already providing below-par accommodation and will no doubt continue to do so.

“The good news is that so far, this doesn’t seem to be the case and the nation’s HMO portfolio not only remains robust, but is worth an incredible sum in the current market.”

BuyAssocation offers highly lucrative opportunities in HMO property investment as part of our ever-evolving portfolio and partnerships with leading developers. Get in touch with our consultants to discuss your investment goals and identify HMO investments.

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