Stop buying HMOs

I’ve been driven to write this after receiving almost daily calls from HMO landlords asking us to let their vacant rooms out. This post might sound a little bit hypocritical considering we manage them through Ultra Lets, but we don’t manage many and we do it to try and help investors who have been sold them. These are the main reasons why we recommend avoiding them:

Lack of demand – About 4/5 years ago there was an explosion of get rich quick HMO investment courses popping up all over the country in which people were showing newbie investors how to maximise their rental yields by turning a 3/4/5 bed property in to rooms. Everyone seems to be doing it now and nobody listens to the advice of the agents on the ground. They. are. all. empty.

Unrealistic rental demands – In Hull a tenant can rent a 1 bed self contained flat for as little as £250 PCM. Ok they are still liable for the running costs but this still offers much better standard of living and value for money than a 70 p/w non en-suite room in a HMO.

Often bought in the wrong areas – I’m sure people may have made good money out of these properties in the early days however landlords buying in HU3 and HU4 are finding that they are struggling to let the rooms. HMOs are only good for student accommodation in some areas of HU5 but there are some big players in this market with a lot of exposure and experience and its not worth trying to take that on.

Undesirable accommodation – **Controversial**  but to most people the idea of sharing a bathroom and kitchen with 3+ other random people is stuff of nightmares as a result tenant are often renting them as a last resort. In our experience the good HMO tenants tend to move out every 6 months.

Licensing and legislation – to put it plainly the government hate HMOs. They’re perceived as a rip off for tenants and an accident waiting to happen. They are trying to make it as difficult as possible to be a HMO landlord. HMOs are licensed in some areas and will be in others soon too including Hull in October.

There is no such thing as fast money in property investment despite what a training course at a hotel with a free buffet has told you about HMOs being the key to ‘financial freedom’. Unless you have access to and knowledge in a booming market or a manage to find a genuine BMV property which you can flip quickly, you can’t make fast money.

Just no.