How To Assess & Reassess HMO Investment Locations In The Current Economic Climate

Location is everything when it comes to property investment, especially HMOs. It impacts so much, including supply and demand, profitability, and how desirable your property will be. And overall, it determines the success of your HMO investment!

Really take the time to become an expert on the location you’re investing in, and also make sure you’re always keeping up with what’s happening and changing locally and nationally. At times, you’ll need to re-evaluate your investment location, particularly when there are changes in the economy and property market.

So, start by undertaking an in-depth area evaluation for the locations you’re investing in. Even if you feel you’ve done this recently, it may be worthwhile reassessing this in the current economic climate. This will help ensure you know exactly what’s happening in the local market right now!

In this blog post, we’ll cover what and how to assess and re-evaluate your HMO investment locations and some of the top areas for investing in HMOs.

5 Things to Reassess in a HMO Investment Location

Here are the five main things to re-evaluate in a HMO investment location! Keep in mind that it’s important to look at not just what’s happening now but also what could change in the future.

1. Sales and Rental Prices

Where’s the market at in terms of average house prices and room rents? Look at recent sales and rental price data going back six months. Have there been any significant changes? HM Land Registry is a great resource for sales price data, and SpareRoom can provide figures on room rents.

2. Property Types

Check out what kinds of properties are presently coming onto the market. Do they fit with what you’re looking for? Also, look at what the competition is across the local HMO market. What types of properties are landlords letting out?

3. Supply and Demand

Supply and demand can fluctuate, so it’s another important area to reassess. Has demand among your target tenants remained strong in the area? What is supply like? Is it oversaturated with HMOs or is supply not keeping up with demand?

SpareRoom, which is basically the Rightmove for letting rooms, has a huge amount of data on offer, even with its free membership. Through this, you can find out the difference between the number of tenants looking for rooms in a specific area and the number of rooms on offer. You can also compare this data to locations across the country.

4. Legislation

Research whether any legislative changes have or could come into effect in the area in the near future. This includes Article 4 directions and additional or selective licensing schemes. If there could be changes afoot, you need to factor this into your investment plans and decisions.

5. Profitability

When considering profitability, think about both rental yields and capital appreciation prospects. You’ll need to understand how the numbers can stack up in a deal and factor in up-to-date costs to determine what yields you should be achieving in a certain location. And this is where working through deal appraisals comes in!

Additionally, proximity of a HMO to amenities, such as transport links or parks, could mean you’re more likely to earn capital appreciation over time. Other things to look out for are infrastructure and regeneration plans.

Has anything been announced or delayed? If there are several exciting projects and developments happening, then property values could increase over the next five to 10 years. And this would help you recycle capital out and grow your HMO portfolio!

After reassessing all of these areas, compare what you’ve learned about the location to what you’re trying to get out of your HMO deals. Is this location still allowing you to do that? If so, great! But if not, you may need to change your strategy or look at a different location or type of property.

Top Hotspots for HMO Investment

The success of any HMO property relies on it being in the right location. Usually, this is somewhere with either a lot of students or young professionals – depending on your target tenant.

Recently, Simply Business named the top five hotspots for HMO investment. Is it a surprise that all five of the cities have multiple universities and strong employment markets? The list featured London, Birmingham, Bristol, Manchester, and Cardiff. But there are a lot of other great locations across the UK to invest in HMOs.

In Conclusion

Assessing your HMO investment locations thoroughly and frequently can allow you to be unequivocally confident in what you’re investing in!

So, become a local HMO expert. Nerd out over the data and really understand the ins and outs of your local area and market! And maybe even create a system and process to help you do this effectively moving forward.

If you’d like more advice and lessons on how to scale your HMO business, become a member of The HMO Roadmap today!

About the Author:

Andy Graham is the founder and the lead trainer at The HMO Roadmap! He is also the co-founder of The HMO Mastermind and Smart Property, a specialist HMO property investment and management company. He writes as a regular columnist in different magazines about a variety of HMO topics and is the host of The HMO Podcast! Follow Andy on Instagram!