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Don’t Make These 5 Common Mistakes While Investing In HMOs

In recent years, the demand for investing in HMO properties has increased drastically. All thanks to the high return on investment (ROI) it offers, which is not even comparable to single-let properties. However, with the desire to make more money, many investors make some common mistakes that can increase the risk.

They have highlighted some commonly repeated mistakes by investors. Learning about them will reduce the risk and allow them to make fruitful investments in HMOs.

1.    Not Researching About The Competition

It is no hidden story that the demand for HMO properties or houses in multiple occupation is increasing. These are such residences where multiple un-related tenants can reside and pay separate rents. But many investors forget about paying attention to what their competitors are offering.

It is a most common mistake made by even experienced investors; they just analyze the area to see the rental demand. Though it is also important to research but completely ignoring your competition in the market can create a problem. It would be best if you do thorough research as an investor about how you are going to become the best rental service provider in your area.

And this is only possible when you know what your competitors are offering, and you provide it better. For example, if they have no rooms with en-suites for professional tenants, you can take it as an opportunity. It will not only increase your revenues but also make your tenants stay longer.

2.    Targeting Wrong Tenant Type

Make sure you target and look for those tenants that are suitable for your HMO. For example, if the HMO property is near campus, but you want to target or let apartments to professionals. This approach is wrong and not workable. You will not find tenants as that place has more students looking for HMO rooms than professionals. Remember, your preference for tenant type and the area must coincide, or you will suffer big time.

3.    Not Hiring Suitable Letting Agent

Many experienced investors perceive that they can do without hiring a letting agent, which is their case, can be true. If you have been working in a similar area for the past few years, know the area and your tenant profile; hiring an estate agent may not be necessary. But for newbie investors, it is a must. There are many letting agents who seem a perfect fit for your property.

But they do not have experience working with your chosen tenant profile. It is an important factor that can really play a significant role. Therefore, do not only look for a letting agent with suitable experience; you need to meet them at the property for discussion. Trust us; you will get the idea of whether they are suitable or not after meeting them in person.

4.    Not Researching About Rental Demand

Though HMOs generate cash flow and rental yield, if you do not do proper research, results might be the opposite. Purchasing HMO property in an area with few applicants or tenants will generate a longer void period. Therefore, right after you make a decision about investing in such properties, make sure you analyze the demand in the specified area.

Even many top investors sometimes make such mistakes. At times, there are not enough people in the area who want a room in HMO, or the area is already stuffed with HMOs. With the right research, you can save yourself from the loss.

5.    Demanding For Higher Rental Price

Always remember as an investor that the higher-earning in HMO property is not because of demanding higher rental price. The main reason is that there are multiple tenants, paying separate rents. This generates more revenue than the single-let property, where there is only one tenancy.

So, do not ask for higher rental prices. The best practice is to analyze the rents of other HMOs with similar facilities. Also, remember that you are also in competition with single-let properties in that area. If the rent of your HMO property and the one-bedroom flat is the same, you may lose tenants.

Conclusion

HMO Property Designs conclude that being an investor, you need to be mindful of several factors. Not paying attention to rental demand, your competition, choosing the wrong tenant type or the rental price can significantly impact your rental yields. But avoiding the mistakes listed above, you can save yourself from a troublesome situation and be sure of generating more revenues.

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