We have noticed an increase in HMO property investment. Who wouldn’t want to invest in HMOs as they generate a lot more income than regular buy-to-let.
The cost of setting up an HMO often can be a lot higher than a traditional buy-to-let. And the main reason for that is the initial conversion cost. HMOs are all different, but in order to stand out from the competition and charge higher rent, many landlords choose to offer en-suite rooms. Moreover, many residents want their own bathroom at least. This involves some additional costs.
Another cost stands for the HMO refurbishment. As the HMO property market is being very competitive costs can go through the roof. Landlords want to stand out from the competition so doing high-end refurbishments to attract more tenants.
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While regular rental properties can be usually let unfurnished, HMOs are usually let fully furnished and this is another cost to remember about. In addition, you’ll have to furnish each bedroom, ensuite, and kitchen.
The biggest positive thing and the reason to invest in HMOs is that landlords are able to remortgage their HMOs to release capital once the refurbishment is complete. Many landlords after using this strategy are very surprised by their positive cash-flow.