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Student House v.s HMO


ja rafter

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Hello all,

 

I currently have a small portfolio of single family buy to lets, which I have acquired over the last 3/4 years. I now feel I am at a stage where I would like to move into the world of multi lets. 

 

However I am getting conflicting reports from more experienced landlords than myself in which area to go into. Some are saying a traditional HMO (i.e letting rooms to working class professionals etc) is the way forward and others are telling me stay well clear and concentrate on the student market. At this stage it is probably advantageous to say I am looking at buying in Hull (My local city)  

 

We have a good demand in my opinion for both options, a large university with multiple campuses and an emerging labour market with Siemens and other blue chip companies investing heavily in the area. Can anyone share their opinion on the positives and negatives of both options?

 

Any advice and knowledge shared would be greatly appreciated.

 

Thanks

 

James 

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Hi James

 

I am aware of Hull as an investment location and have some local interest and knowledge, albeit starting to become quite dated...but as a result I do try and pay attention to what happens there.

 

The first thing I always say is to look for any personal motive when someone tells you to do or not do something. If they are not selling you the idea for personal interests then you can probably have more trust in what they are saying (ignorance excepted!). Even so, do your own checks but some sales people do actually tell the truth ;) 

 

I would say that the student market in general is becoming far more professionalised and is more and more being operating by larger corporates (with or without the direct involvement of the Unis). This means higher standards and greater competition as a a result. Does it mean that you cannot profit in such a market as a smaller landlord / investor...no, you can still. But it does suggest that you will need to up your game to do so and the long-term picture may prove to be trickier.

 

There is also a shift in general to professionalise the PRS more generally, but outside of the student market, this has not so far really been targeted at multi-lets but single lets instead. There are exceptions, especially in London, but in Hull I would say that working tenant HMOs have some legs yet still.

 

My final point is that anyone can pretty much create a multi-let e.g. a 2/3-bed house with living room as a bedroom becomes 3/4 people sharing, with very little in the way of conversion and no planning or licensing requirement. I do believe that the days of this type of multi-let will become more limited and that the market will move toward more en-suites / less shared facilities, higher spec, superfast broadband, and so on. From a profitability point of view, it's usually the 5th room (or more) that brings the real profit! Finally, there is a Gov consultation around making all 5-bed HMOs licensed regardless of how many floors are in the building...which would mean higher standards for the profitable ones and leaving the unprofitable ones to have a race to the bottom. So, if I were to venture into multi-lets in Hull, I would aim to do more than simply buy a big house and rent it by the room.

 

I hope that helps,

 

Best

Richard

Richard W J Brown a.k.a. The Property Voice

Property Investment Strategist

10%+ ROI property deals every week: check out PROPERTY DEAL TIPS
Amazon best-selling author Property Investor Toolkit & #PropTech, YPN Magazine columnist & PODCAST host

Web & Blog: The Property Voice | Curated property news & insights feed

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Hi Richard,

 

Thanks for sharing, it has really made stand back slightly and take a look at what is going on. 

 

I have to say creating a 5/6 bedroom boutique HMO in Hull really does appeal to me, but at this stage I don't know if something like this is required. 

 

I know you mentioned you keep an eye on the area but the city is really on the up, Hilton have just broke ground and have a large hotel going up which to me suggest they feel its worth a punt. I appreciate an investment can't be simply based on one international firm however added to other factors, such as the the Marina, Siemens, the redevelopment of the Theatre etc it is all starting to add up and make me think the City could accommodate such a property.

 

Once again Richard thank you for reply.

 

All the best

 

James

 

 

 

 

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Hi James

 

No problem! I am aware of lots of regeneration taking place in Hull and so it does give a good indicator about future growth prospects I agree.

 

My comments were aimed at helping to 'future-proof' your investment more than anything. I am sure you can achieve short-term profits without getting a licensed, large HMO (with planning approval) in a boutique style...but for how long? Some property strategies achieve profits with a quick in and out (e.g. trading or development), whilst others require careful planning, nurturing and defence (e.g. BTL in all it's guises). In fact, this discussion has probably prompted a blog or article on the subject...so thank you for that!

 

Anyway, it's your train set as I recently heard someone say :)

 

All the best

Richard

Richard W J Brown a.k.a. The Property Voice

Property Investment Strategist

10%+ ROI property deals every week: check out PROPERTY DEAL TIPS
Amazon best-selling author Property Investor Toolkit & #PropTech, YPN Magazine columnist & PODCAST host

Web & Blog: The Property Voice | Curated property news & insights feed

Facebook Page | TwitterLinked In

Let's connect...mention The Property Hub :)

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Hi Richard

 

The boutique HMO I agree would probably only have a shelf life of a couple of years until the hype surrounding the city has faded, perhaps I should be looking towards Leeds and    Manchester for such a property. BTLs will always be needed whatever happens to a city, in prosperous times people come for work and in down times people will be unable to afford to buy. Sad but true.

 

I would be interested to see the blog or article you do on this!

 

Thanks again

 

James 

 

 

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