6 Keys To Successful HMO Management In Cambridge
Before we begin, let’s answer three necessary questions —
i. What is a HMO?
A HMO, or house of multiple occupation, is where three or more unrelated tenants live in one property, sharing living facilities like bathrooms, kitchens, and living spaces.
ii. Why invest in HMOs?
HMOs are a popular choice amongst landlords in Cambridge since they can bring in a higher rental yield than standard single let BTL — often four times the amount! Landlords can charge a separate rent for each room or command a single higher rental amount each month from groups of sharers, and this boosts their revenue potential exponentially.
iii. What are the disadvantages to HMOs?
HMOs are unquestionably one of the best strategies for making money in property. But more money means more work. HMOs come with complex compliance requirements and require greater responsibility from the landlord, particularly when property management comes into the equation.
To help you with this, here is my guide to best practice for HMO management in Cambridge —
1. Check Whether Or Not You Need A HMO Licence
Running a HMO property may require landlords to obtain a licence. Properties with five or more tenants are “large HMOs” and legally require an HMO licence. It’s essential to do the necessary research and investigations to determine whether a licence is required in Cambridge and, if so, what this will cost you.
If you’re unsure, get in touch. The team at Babouris and I are on hand to help you with whatever you need.
2. Ensure Compliance With HMO Fire Regulations (Fire Safety)
Before letting out an HMO in Cambridge, it must meet all the necessary fire safety requirements. Fire risk assessments must be carried out, and the property must be equipped with fire doors, have clearly defined escape routes and suitable escape windows. You may need fire extinguishers, fire alarms, emergency lighting, fire blankets, and clear exit signage.
3. Furnish your HMO
There is no legal obligation to furnish an HMO, but HMO tenants will expect it and letting a furnished property increases the chance of finding tenants more rapidly. In general, tenants stay in an HMO for less time than a conventional let and therefore prefer furniture to be included for added convenience.
Each item of furniture provided needs to take into account the number of people who will be living there. It’s also important to consider wear and tear since the furniture will be used a lot more frequently in an HMO than in other types of rental property.
4. Know That Type Of Tenancy Agreement You Need
Landlords in Cambridge must first choose which type of Assured Shorthold Tenancy (or AST) to use. There is a choice between separate ASTs for every individual tenant, or a joint AST for all the tenants in the property. The latter is most common when friends or students live together since group tenancies work most effectively when the tenants who move in are already acquainted with each other.
5. Finding The Right Tenants For Your HMOs
Getting the right tenant type is essential when creating a profitable HMO. At Babouris, we have follow two golden rules to get this right —
i. Don’t Mix Tenant Types
Ensure that each property is lived in by either students or professionals. Never both! A similar age range and style of living is often the best choice to minimise friction and create the best living situation for your tenants. You can’t really expect a middle aged professional, a student and someone claiming LHA to all want to live the same way. By defining your tenant type and catering to that you can help eliminate disputes.
ii. Look For Balance
A lot of people fixate on getting all male or all female tenants and worry about what clashes might come up if you have 5 men, 1 woman for example. Our general rule is to judge it in the context of the property and if you’re not sure, just ask your prospective tenant what they are comfortable with. If in doubt, you can never go wrong with a balanced mix.
Once you’ve defined your target tenant type, you need to find suitable tenants. Landlords would do well to consider SpareRoom.co.uk or StuRents.com. Otherwise, be sure to work with a reputable letting agent with a proven track record for success in the room let market, such as Babouris.
In Cambridge, you should find a high demand for your rooms. But don’t be blinded by wanting to get tenants in straightaway and start getting the cashflow. You need to select the right person and do the right checks.
Once a tenant has viewed the room and we have met them personally, we then ask for references before proceeding. Always remember to do your checks before a tenant moves in, as once they do, it’s much harder to remove them.
6. Consider the challenges of managing an HMO
Managing an HMO in Cambridge is different from managing conventional rental properties. When a whole property is let out to a couple, family or individual, there are likely to be fewer problems and issues between the tenants are extremely unlikely.
HMOs have more tenants, and they may not be familiar with each other before moving in. This can lead to some unique problems, including potential tenant disputes.
HMO properties are also susceptible to more wear and tear, and therefore items will need to be replaced more frequently.
Overall, HMOs require more attention from the landlord than single lets and, therefore, need to be run in a business-like manner.
Taking a proactive approach to repairs and maintenance, for example, is important to save money in the long term. Dealing with receiving rent from multiple tenants can also be time-consuming and stressful. Therefore, using a specialist property management company like Babouris is a good idea.
At Babouris, we offer a comprehensive service, including managing emergency repairs, rent collection, marketing, and finding tenants. To find out how we can make the process of managing your HMO in Cambridge more efficient and stress-free, get in touch today.
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Comment below if you have any questions or thoughts about successfully managing HMOs. To discuss anything else and share ideas with likeminded property investors, join the Cambridge Property People online community. You can also subscribe to Hi-Five Friday, a weekly email newsletter of what the Babouris team are enjoying, following and working on in the world of HMO and property investment.
Meet The Writer:
Alex Babouris is a HMO investor with more than 10 years of experience. He is the founder of Cambridge Property People – a community of local property professionals, investors and enthusiasts, and Alex is the founder and lettings director at Babouris – a specialist HMO property investment and management agency.