This is an interesting one – and a question I get asked ALL the time!

There’s basically a couple of schools of thought on this and the simple answer is – it all depends on how much cashflow you want to make!

Generally speaking; when you convert a property into a HMO, you normally include the bills as part of your rent.  Now given that bills can be as much as £130 per tenant per month, you need to make sure that you will be generating sufficient cashflow to cover this cost.

I generally look at it from the point of view of rooms being boxes – so a 4 bedroom house with 2 reception rooms would be for me a 5 box house.  3 of the boxes would cover my mortgage, the 4th box the bills and the 5th box is PURE cashflow to you.

The official definition of a HMO classifies any property where two or more unrelated people are sharing but this covers everything from a flat with two flat mates right up to a 20 bedroom HMO!

Here are some tips that I use when determining whether a HMO is going to work or not:-

1. How near is it to a shop, local amenities, bus route or any sign of life!  Its no use buying a lovely large house in a village or a field or a suburb that is miles from the city centre – room sharers are generally not going to be interested
2. Does it have enough reception rooms that I can keep one free for the sharers to use as a communal living area?  You don’t need to do this but do you want to be a landlord who isn’t keen on maintaining standards and isn’t interested in making sure their tenants are looked after?  Would you want to live in a 10 foot square room with only a kitchen and bathroom to congregate in – I wouldn’t
3. Does it have enough parking for at least half of the rooms you intend to let out?  You can get away with on-street parking but only in a quiet street where there is plenty of parking (I have one or two where it works).  Generally, the more off-road parking you are, the more attractive this will be and especially to those higher paying professional tenants.
4. Is it attractively presented from the outside?  Like it or not, a tenant is sold on the house from appearances and first appearances count.  If you have weeds growing everywhere, rotten window sills and paint peeling from the door – your prospective tenant is going to think – uh oh, if its this bad outside, what will it be like inside!

So there’s a few to be getting on with, watch out for my next post where I talk about how you review the inside of a house for the optimum HMO.