Houses of Multiple Occupation (HMOs) are becoming more and more popular as places to live and also as a means of a high yielding investment for savvy property investors. If you’ve just begun your journey into property or already have a couple of buy to lets you may be wondering how to get started in HMOs. There are some pitfalls for the unwary as HMOs are a more advanced strategy than simply buying a house and letting it to five people. A friend of mine jumped straight into buying her first HMO on the advice of a contact, only to find that she couldn’t let out the rooms except at a much lower rate than her contact had indicated. She was not making much more money than she would have if the property were let to a family, and causing her much more stress. What was the reason for her mistake? She didn’t do her due diligence enough on the property. If she had she would’ve realised that the property wasn’t in the right location. It didn’t meet the characteristics of what I’ve called the ‘MICRO’ location – the identified most useful and popular features than tenants want in an HMO.

What are the ideal Micro location characteristics?

• Near to town centre – no more than a 15 minute walk
• A local, corner shop-type facilities within 1 -2 streets away OR large supermarket nearby
• Some entertainment facilities (cinema, bowling, theatre) within a couple of miles
• Health centres and/or GP facilities within 2 miles and a large hospital within 15 miles.
• Public transport facilities such as bus routes or trams or trains within a few streets (15-20 min walk maximum)
• AVOID double yellow lines outside a property if you can. Not only will this inhibit the tenants to park nearby to the property if they need to, it also indicates a busy road which may deter them.

Don’t be put off if you can’t tick off all these indicators in your chosen location, but be aware that tenants need access to practical services and may not always have a car, so local services are much more important to them.

Once my friend realised her mistake, she understood why her rents were not what she was hoping for. The experience has not completely put her off though, as in the end it attracted a group of Polish workers who have kept the property beautifully and been excellent tenants. Now, armed with better knowledge, she knows how to find the location for her next investment. She has the tools and guidance she needs to find the right property in the right place. By understanding what tenants are looking for she will be much better prepared for her second HMO, and therefore better able to make money from this kind of investment.