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Which HMO Strategy is right for you?

There are essentially five different HMO strategies that you can adopt.  Which one is right for you may well be determined by your target area – for example of your target area is an area without a university, then the student market wont be for you, however you may have a choice between attracting LHA (Local Housing Allowance) or Professional tenants. Here we look at the pros and cons of each strategy, and a “top tip” for each.

Working Professionals

Pros: Not seasonal, higher occupancy rates can be achieved for a quality product, if well systemised, less management and maintenance then might be required for a student house

Cons: Higher expectations, Higher standards, becoming more competitive.

Top tips: Working professionals will often consider the other tenants just as much as the house itself. Ensure that you focus on providing the right community by ensuring that your tenants are similar ages and similar mind sets. Encourage your existing tenants to be involved in the viewing process – good tenants attract other good tenants.

Blue Collar workers

Pros:  Normally they are Monday to Friday so their requirements are ore basic. Easier to manage as they tend to use the accommodation for meals and sleep only. Less viewings to fill the rooms. Higher supply of suitable houses to convert as less configuration required.

Cons: Can be seasonal depending online of work. They often come in batches and leave in batches, so you can end up with several rooms available at the same time. Hard to attract premium rates.

Top Tips:  Keep your refurbishment simple. Don’t go over the top. Focus more in location – these tenants don’t want to spend too long commuting when it’s normally just a bed for the night they need, and so location will be their main requirement.

Whilst workers expect high basic levels of comfort, you will not need a “wow” factor to attract them to a property as many are “Monday to Friday” so the house would not be theirs.

Students

Pros: Constant demand, not directly affected by economic down turns. Most student towns now have article 4 which restricts supply and in turn can prevent saturation. Students often (though not always) have lower expectations so refurb/conversion costs can be lower.

Cons: Properties can be harder to source due to article 4 directives in most student towns and Cities, students are seasonal – you will generally only attract them at the beginning of the academic year. Voids are harder to fill. Can be harder to manage – you need to undertake regular property visits and have strict “house rules”

Top Tip: Aim for International Students. These students often have higher budgets and will pay for a premium product. They are often more “mature” and so require lower levels of management.

LHA

Pros: easy to find tenants. They often stay for much longer periods. Easy to find houses that can be configured/ converted for this purpose. Most locations will work. Less investment required for conversion.

Cons: there are less problems with this model then you might think. The majority of these tenants are honest with high levels of integrity. However, if something does go wrong it normally goes badly wrong. For example a rent default can end up costing thousands in lost income and legal fees for eviction.

Top Tip: Contact your local council. Most have a surplus of tenants they need to house, and often they will agree to let your whole house and pay all the bills. If not, they can at least provide you with tenants.