According to Paragon Banking Group’s latest report and a recent landlord survey, HMOs are in high demand. While we all know about the housing shortage, tenants are snapping up rooms in these shared properties, leading to a healthy market overall.
What’s driving this demand?
- Lower bills: With energy prices dropping, sharing the cost with other tenants becomes even more attractive.
- Council tax changes: The way council tax is calculated has shifted, with individual rooms in shared houses now taxed separately, making HMOs more financially appealing for landlords.
The Numbers Tell the Story
Paragon’s report shows just how popular HMOs are:
- 19% of landlords own at least one HMO property.
- 54% of landlords fully own their properties, while 37% use interest-only mortgages.
But it’s not just HMOs:
Landlords are also keen on other property types, with:
- 62% owning terraced houses.
- 47% owning individual flats.
- 45% owning semi-detached houses.
Rent is Going Up
It’s no secret that rents are rising across the board. 78% of landlords have already increased their tenants’ rents, and 63% plan to do so again in the next year.
The reasons behind this:
It’s not just landlords being greedy. The increase in mortgage interest rates is forcing many landlords to raise rents to cover their costs.
The Challenges of HMOs
While HMOs can be a great investment, there are some things to consider:
- Complex lending: Getting a mortgage for an HMO can be tricky, so it’s important to understand the ins and outs.
- Health and safety requirements: HMOs have specific regulations, so you’ll need to be on top of things to ensure everything is safe.
- Tenant compatibility: Finding tenants who will get along and live harmoniously is crucial.
The Bottom Line
HMOs are a valuable segment of the rental market, offering high returns and providing convenient accommodation for tenants. With other landlords moving away from the buy-to-let scene, there’s an opportunity for those who are willing to put in the effort to reap the rewards.
So, are you ready to join the HMO revolution? With a bit of research and the right approach, you could be on your way to a successful and profitable investment.