It may be that you’ve either started your Buy-to-Let journey and have purchased your first one or two properties which you are now happily letting out, or you are an established landlord with a decent portfolio bringing in a fairly healthy level of income.
So, what’s next?
You may have thought about expanding your portfolio into different areas or strategies…
There are many to choose from of course, for example, holiday lets, serviced apartments, commercial to residential, land development…or perhaps HMO’s. Many of these are much more complex and involved than your average BTL property, but a nice little ‘step up’ is the concept of what some call a ‘Mini MO‘.
Now, the type of property in question here is one where you would have between 3-4 tenants forming separate ‘households’. The standard definition of an HMO is a property housing 3 or more people forming 2 or more households.
The difference between this type of HMO property and a ‘fully fledged’ licensable HMO is that there are often fewer requirements needed to set up these smaller HMOs, as well as being more easily managed.
For example…
A 2 bed flat could provide 3 separate rooms and a 2 or 3 bed house could easily provide 3-4 rooms with very little reconfiguration work to set them up in this way. Of course, you would still have to check the necessary fire safety requirements and amenities standards required by the local council, as well as the planning department to check for Article 4 direction, however they are usually relatively straightforward to implement.
More and more letting agents are recognising the increased demand and need for this type of accommodation in certain towns and cities compared to a decade ago. It was often hard to find someone to manage this type of property except in student areas, however this is now not so.
As well as more easily being able to find the right management for this kind of property, you will also receive a higher level of cash flow from a fairly ‘standard’ property. You can often increase the level of yield from mid-range single digits into the double digit range, IF you get it right!
Of course, your monthly costs will be higher too as you are responsible for bills, including council tax, and peripherals such as broadband, TV licence and maybe even cleaner or garden services. However, if you provide good quality, comfortable rooms in an area with good long-term potential, then you could benefit both from decent capital gain (or be able to more easily weather any further financial storms) and further build up the cash flow from your portfolio.
Research is needed to determine all the relevant factors which can help you decide whether this idea will work in the area you are operating in or looking at working with.
In terms of financing this type of strategy, it is considered by lenders to be an HMO strategy and you must therefore ideally already be a BTL landlord to be able to raise finance, if needed.
For more help with this idea, feel free to get in touch with me and I’ll be happy to discuss how you may be able to expand into this strategy. It really can be a great ‘next step’ on from your Buy-to-Let properties.
In the meantime, why not keep up-to-date with relevant property and landlord news by heading over here to grab your copy of my ’24 Golden Property Rules’. 🙂
See you there!
Hazel
Hazel de Kloe
Property Investor | Property Mentor | Speaker | Author
The contents of this article are for educational purposes only and we make no recommendation of any particular property purchase. The price of property can decrease as well as increase and you make any purchases of property at your own risk.
© Why Property Works 2018 | www.whypropertyworks.co.uk
