Photo by Innova Property
As we know, location is everything when it comes to HMO property investment. It impacts so much like supply and demand, profitability, and how desirable your property will be. And it really determines the success of your investment altogether!
You need to make sure that you understand a location thoroughly before investing, but it’s also something you need to keep up with and re-evaluate over time as things can change, particularly in certain economic climates.
In this blog post, we’ll cover the key things that impact a location’s HMO property investment prospects and tips to help investors understand the ins and outs of a location they’re investing in!
The Keys to a HMO Property Investment Location
There are numerous factors to assess to help you choose the best HMO property investment location for you. Here are some of the top things to consider and reassess when it comes to locations you’re considering investing in, and keep in mind that all of these can impact your profitability as a HMO investor!
Supply and Demand
For starters, the location from a supply and demand point of view is one of the most key areas to understand as this can help you understand whether you’ll likely be able to fill your rooms or not. Is demand strong among your target tenants? Is the area oversaturated with HMOs or is supply not able to keep up with demand?
Costs
Increased costs are impacting all of us from rising interest rates and energy costs to higher labour rates and maintenance costs. But there are price variations from region to region for a range of running costs HMO investors need to factor in, and this even includes licensing fees.
As running costs are already higher for HMOs than single lets, this can make a location’s costs even more critical. We all know there are disparities between average house prices and rental yields in regions and cities across the UK, but it’s important to really understand up-to-date local costs and how this will impact you and your property investments.
Legislation
There is certain legislation that could come into effect in areas that could impact its investment prospects. This includes additional or selective licensing schemes and Article 4 directions. If these are in place or could be brought forward in the near future, this needs to be factored into your investment plans and decisions.
And moving forward, as regulatory pressure is increasing, this could cause costs to rise even further for landlords and could mean there are additional costs we need to understand and factor in for the locations we invest in.
4 Tips for Understanding the Ins and Outs of a Location
There are a few things you can do as a HMO investor to help you know as much as you can about where you invest. Here are some of my top tips to understand the ins and outs of a HMO property investment location!
1. Focus on becoming an expert in the local area.
Get interested in looking at all the data on your local area and market. Undertake an in-depth area evaluation for the location you’re investing in or planning to invest in and reassess this frequently too. It may even be helpful to create a system and process to help you do this more effectively moving forward!
2. Look into demand and current stock.
Check out SpareRoom to help you with this. It’s packed full of information on the difference between the number of rooms on offer in a specific area and the number of tenants looking for rooms there. Additionally, you can compare the data to locations across the country to give you a good idea on where the local area stands.
3. Dive into yields and growth prospects.
You’ll need to understand how the numbers can stack up in a deal to determine what yields you could be achieving in a certain location. And this is where you need to perfect doing deal appraisals!
Additionally, a location’s proximity to amenities like transport links or parks could mean you’re more likely to reap the rewards of capital appreciation over time. Also, look for infrastructure and regeneration plans in the local area. If there are several exciting developments happening, then property values could increase in the coming years.
4. Factor in costs locally and keep up with any changes.
It’s important to understand and factor in rising costs in the local area to your deal analysis. It can also be helpful to consider all of your operating costs and check if there are any opportunities for you to save money on your bills.
There are a number of great HMO opportunities out there, but make sure you do your due diligence when deciding on a HMO property investment location! And don’t forget to reassess this from time to time as well.
If you’d like more advice on understanding location from a HMO property investment perspective, 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!