| by Kenneth Chase | 3 comments


– Hello, in this video,
I’d like to talk about HMO versus single-let property. I’m gonna talk about exactly what they are and the pros and cons of each. So my name’s Simon Zutshi, I’m
the author of Property Magic, the Amazon property number one bestseller, I’m the founder of the
Property Investors Network and I’ve been investing
in property since 1995. I have both HMOs and
single-let properties. In fact, my very first rental property was a student HMO back in 1998. So I think they’re both great, and there are definitely pros
and cons for both of them, so let’s look at those first. So let’s think about
a single-let property. That’s where you have
a house or an apartment that you let out to one tenant. Now that one tenant could be a family, could be an individual, and generally they’re less work than an HMO, because once the contract’s in place, you let the tenants pretty
much get on with it. Now, as a landlord, you’re responsible for looking after the property, making sure everything works properly, but the tenant, they pay
for all of the bills, they pay their own council tax, they pay their gas, their electric, their broadband internet, the TV licence, that’s all their responsibility. All you need to look after is the insurance for the building, and obviously you always need to make sure you have proper landlord insurance that not only covers the
building or the contents, but also gives you public
liability insurance just in case an accident
happens in the property. You need to make sure
you’re covered for that. Now, you can manage
that property yourself, it doesn’t take a lot of time, but when I first started
investing in property I was absolutely managing
it all on myself, ’cause I didn’t really
wanna pay a letting agent. However, if you’re not
local to the property, it might be worth getting a letting agent looking after the property for you so if there are any issues,
you’re not the person who gets a call at 11
o’clock at night on a Friday when the tenant’s lost their keys, it’s the letting agent deals
with all of that for you. Now, that does affect your cashflow, and typically, a single-let property can make 100 or a couple
of hundred pounds profit, it’s about a five to seven
percent return on investment, so it’s better than leaving
the money in the bank, and obviously you get the
long-term capital growth as well. Let’s talk now about HMOs. So a house of multiple occupation, and normally it’s a larger
house or a larger apartment where you might have, ideally, somewhere between four and six
people sharing that property. Now, they each have their
own individual room, sometimes they might share a bathroom, or some of the rooms might be en suite, which means they have their own shower, hand basin and toilet, and you can get a higher rent for an en suite room. They’ll always share a kitchen, and they might even have
a communal living room. Now, who would want to live in an HMO? Well, often, students
live together in a group when they’re studying at university and people who have been
students and moved on, then got great jobs as an architect, a solicitor or accountant, what
we call young professionals, they also like living in these properties. You see, if someone has to move to a new city to get a job, and they don’t really know anyone there, they can move into an HMO, they have an instant social life, living with people who are like them, people to go to the pub with, and also, it’s more cost-effective living in an HMO than it is living on your own
in a studio or an apartment, because you would have
to pay for the bills. You see, in an HMO, the landlord generally covers the cost of the bills. So there’s the council
tax, the gas, the electric, the TV licence, the broadband internet. By the way, broadband internet
is very, very important to the people who live
in this kind of house. Very important you make sure you get the best possible
internet you can, not the cheapest, that’s not
a good place to cut costs. Now, again, as a landlord,
you need to make sure you have the right insurance in place, and you might decide to
manage the property yourself. It is definitely more work
than a single-let property, just because the nature
of having more tenants. But in a way, it’s a bit like having four or five single-let
properties all in the same road, because when you go to the HMO, you’ve got four, five tenants you could deal with at the same time. Now, you can get a letting agent look after the property for you. The challenge is, historically, many letting agents,
because they’re more work, because they don’t understand them, haven’t wanted to do HMO management, but there are more and
more specialist companies coming out now who can
help manage HMOs for you. The reason people do HMOs is because there’s significantly higher cashflow and return on investment
than they might get on a single-let property. So a good HMO should make you about £1000 a month profit. That’s after all of the expenses, the mortgage, the insurance,
the management, everything. If an HMO made less than £500, personally, I wouldn’t buy it. It’s not worth the hassle. But it can make as much as one and a half, even £2000 a month. But £1000 a month is a pretty good average for a six-bedroom HMO. That also means the return on investment is much better than a single-let property, which, as I said before, was maybe five to seven percent
return on investment. An HMO should be 15 to
20 percent or even more. So you’re making your money work harder, you’re getting better cashflow, and that’s why many people
favour doing HMO properties. Some people say you should
maybe buy a single-let first to make sure you like
property before you do HMOs. I can see the logic in that, however, if you get a bit more education and learn how to do an HMO straight away, why on Earth wouldn’t you
want to get your money working harder for you as
soon as you possibly can? So if it comes to HMO versus single-lets, my vote would always be for HMOs. I do hope this video’s
been useful for you, please do put some comments below, we got a lot more videos
about HMO on this channel, so subscribe to the channel if you want, and I encourage you to
always invest with knowledge, invest with skill, thanks for watching.


R Mendola

Mar 3, 2019, 12:32 am Reply

Thank you for this content ?

Ian Taylor

Mar 3, 2019, 2:58 pm Reply

Simon says, “My vote would always be for HMOs”. Consider the following. Managing a 5-Bed HMO is as much work as managing 5 Single Let properties on the same Street. The Capital Growth of the HMO would not be as much as five Single Lets. The Return on Investment from the HMO would not be as much as you would get from five Single Lets. Should you wish to liquidate part of your portfolio, you could divide off and sell any number of the five Single lets, whereas you could not “divide” the HMO.

Luxus Häuser

Aug 8, 2019, 7:55 am Reply

Please do a video on choosing the right tenants vs slum tenants that thrash properties.

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