Should I invest for capital growth? Should I invest for income? How can I do both?

If you’ve ever looked to invest money you’ve probably asked yourself those three questions at some point. It seems that many investment opportunities only offer one or the other. Take stocks and shares for example. Some are labelled as ‘income’ and some are ‘accumulation’. In other words, you can’t expect to have both income and growth from the same shareholding. ‘BUT I WANT BOTH’! I hear you say! And me too! I’ve discovered that there is a way to achieve both, and it is through investing in property, more specifically HMOs or Houses of Multiple Occupation.

So, what is an HMO? A house which is shared by 5 or 6 young professionals where they have their own room, but share a kitchen and possibly bathroom as well. One house, housing not just ONE family but six individuals all paying rent. So, six times the income of a normal buy-to-let house. How does that sound? Exciting, eh? And at the moment in the UK, with house prices being out of reach of many people, and wages stalling, many people love the idea of shared accommodation as it saves bills, time and hassle. And because you are investing in bricks and mortar, the value of the property goes up over time faster than any asset group. Tada! Income and growth from just ONE property.
How can you get into this lucrative and more advanced property investing strategy? Well you need to know your area first. This is what I call the MACRO and MICRO investing strategy. In terms of your MACRO area, the best HMOs are located in an area with a population of NO LESS than 80,000 people – otherwise you are unlikely to have the right number and supply of houses. The area needs to have robust and various transport links to the wider region (train, coach, bus, motorway, tram etc). It needs to have at least 20 medium to large employers (3000 people plus) who have a significant need for skilled or semi-skilled labour.
Look out for local plans for growth, regeneration and investment. Knowing the priorities of your local council for development over the next five years is a core part of understanding the viability of a potential HMO. Where are the retail and shopping facilities that cater for all segments of the population? And importantly, at least 10-15% of property in the area needs to cater to the overall rental market. This factor is important as it influences your tenants’ ability to move up and out of your HMO eventually. Some may leave due to job changes, others will purchase their own property and many will move into a single let property. If there is limited opportunity to move up the rental ladder this will affect the popularity of the area with regard to HMO room lets. Also having a strong local rental demand will ensure there are plenty of lettings agents locally who you can work with to let out rooms.
Next, I’ll help you identify your MICRO location in which you’ll learn how to uncover the best streets and types of houses that make IDEAL HMOs!