What Are The Biggest Challenges And Concerns HMO Landlords Are Facing?

There is a whole raft of challenges HMO landlords are currently facing, and many of these are bringing major concerns with it. But don’t fret! There are ways we can navigate these areas to make our HMO portfolio sustainable and successful.

In this blog post, we’ll cover some of the biggest challenges and concerns for HMO landlords in 2023 and include our top tips and advice to overcome and manage these!

Higher Running Costs

With costs going up across the board, landlords are making less and less money. Higher interest rates and energy costs have caused many of us to make changes to ensure our HMO portfolios are still profitable and sustainable.

We all need to be proactive in improving the financial efficiency of our HMO businesses. While UK inflation slowed in December and is expected to fall from the middle of 2023, it’s still near a 40-year high at 10.5%, and prices for many goods and services remain at high levels.

Tips: It’s not just about finding ways to reduce overheads but also improving profits. And with high costs, you need to be realistic about this, what’s possible, and what you need to do to manage the impact of this!

Tenants Not Able to Pay Rent

With the ongoing cost-of-living crisis, rent arrears are naturally a top concern for landlords. This can be a black hole, costing thousands and thousands of pounds, and things may not get easier on this front.

Financial insecurities and rising rent payments have led 78% of tenants to say they’re worried about how they will pay rent, according to the HomeLet Rental Index. Figures in The Telegraph have also revealed there’s an expectation that 400,000 households will fall behind on their payments.

Tips: To manage this growing worry, require every tenant to have a UK-based guarantor. This can take some of the financial pressure off and help protect your HMOs moving forward. It’s also helpful to have a clear process in place for when a tenant falls behind on rent.

Legislative & Tax Changes

In recent years, there have been a number of legislative and tax changes impacting landlords, and there are even more on the way. Additional licensing schemes for HMOs will come into effect in certain areas in the UK throughout 2023 and the coming years.

The Renters Reform Bill, which is set to scrap Section 21 evictions, create decent homes standard for the private rented sector, and cancel fixed-term tenancies, could officially be brought forward this year. But this is something we’ll have to keep an eye on as there still has been no confirmation on specific timescales.

Tips: Be ready for the many changes being talked about in the industry. Focus on making your HMO portfolio agile. This will allow you to act and be able to pivot as and when you need to. Start thinking about how you can keep your business sustainable and future-proofed, and be ready for further changes!

Ongoing Uncertainty

With all of the above at play, there are naturally uncertainties ahead. And it’s of course impossible to predict everything that will happen in 2023 and impact us as HMO investors… let alone what’s to come in the next few years!

But just make sure that you don’t expect things to get simpler or easier. And stay on top of the ins and outs of what’s happening specifically in the HMO market and the private rented sector as a whole.

Tips: Despite these ongoing challenges and concerns, the future of the HMO industry continues to look bright, and there could even be more opportunities than we’ve seen in quite some time! So, it’ll still be important to focus on opportunities and growth. Make sure that no matter what problems you have to face, you remain focused on growing.

For more insights on the HMO market, in addition to lessons and resources on how to start, scale, and systemise your HMO business – no matter the challenges, become a member of The HMO Roadmap! And if there’s anything you’re still concerned about, join our Facebook Group The HMO Community to get advice from experienced investors.

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!