As property investors, we’re all seeking strong returns, reliable income streams, and investments that truly work for us. However, if you’re still solely focused on Buy-to-Let (BTL) properties, you could be leaving money on the table. Enter HMOs (Houses in Multiple Occupation)—a game-changer in the property investment world. Let’s explore why HMOs can often outshine traditional BTL properties:
Superior Rental Yields
Did you know? The average HMO rental yield in the UK ranges from 8% to 12%, while for standard BTL properties, this ranges from 4% to 6%?
With an HMO, you rent out individual rooms. For example, a 5-bedroom HMO charging £500 per room could generate £2,500 per month, compared to a typical BTL property that might rent for around £900 per month in the same area. This significant boost in cash flow can make a major difference in your long-term ROI.
Diversified Income Stream
One of the major advantages of an HMO is the security of a more consistent income stream. Since you’re not reliant on a single tenant, if one room is vacant, the income from the other tenants keeps flowing.
Fun fact: Void periods for HMOs often affect only 1/5th of your income. A vacant BTL property means 0 income until you find a new tenant. For example, in a 4-bed HMO, losing one tenant might reduce your income by 25%, but with three rooms still rented, you’re far better off than with a single-let BTL property.
Growing Demand
In 2024, demand for HMOs is increasing due to affordability pressures. Tenants are increasingly shifting towards HMOs because of their cost-effectiveness and flexible terms.
Key markets:
- Young professionals: HMOs offer affordable alternatives to renting an entire flat.
- Students: HMOs remain a staple of student accommodation.
- Low-income workers: Rising living costs mean more people are seeking shared living arrangements.
Optimised Space Usage
HMOs turn traditional properties into income powerhouses. By converting living spaces into additional rentable rooms, you can maximise the rental potential of the property. For instance, a 3-bedroom family home could be converted into a 5-bedroom HMO, significantly increasing its earning potential.
Tax Efficiency
With HMOs, landlords can offset many expenses, including utilities, maintenance, and council tax, against rental income. For higher-rate taxpayers, HMOs can be a more tax-efficient option compared to standard BTL properties, which have been hit hard by reductions in mortgage interest relief.
Greater ROI Over Time
Perhaps the most important point: HMOs typically yield 2 to 3 times the cash flow of a comparable BTL property. This means a faster return on investment, more funds to reinvest, and the ability to grow your portfolio more quickly.
Why Choose LA Group?
LA Group specialises in identifying the best property investment opportunities in the UK market, with a strong track record and a diverse portfolio. Our team offers tailored strategies, ongoing support, and in-depth insights to help you maximise your returns.
With operations in 5+ countries and more than 100 investors served, LA Group has delivered over 1,000 units and managed £40 million in resources. In the last 4 years, we’ve delivered more than 500 units, helping our clients achieve outstanding results in the property market.
LA Group Quick Facts:
- Countries served: 5+
- Investors served: 100+
- Units delivered: 1,000+
- Resources managed: £40 million+
- Units delivered in the last 4 years: 500+
Let’s Talk!
Are you considering an HMO investment or already have one in your portfolio? Get in touch with LA Group today. Our expertise in the property market in Liverpool and across the UK can help you achieve success with effective, tailored strategies.
Contact Us:
- 📧 Email: contact@lagroup.uk
- 📞 WhatsApp: +44 7726 321535
