HMOs – Q&A – What are the most common mistakes of HMO conversion and how to avoid them!

With over twenty years’ experience of property management, property conversions and HMOs, our MD Douglas Fokuo answers some of the most frequently asked questions about HMOs and outlines some of the most common mistakes people make when converting a property into a HMO, and also how to avoid them!

Q. Why do people consider HMOs as a profitable investment?

A. Well, that’s an easy question to answer. HMOs can provide significant financial returns for clients. It’s simple maths that a HMO with multiple tenants is more lucrative than one tenant in the whole house. More tenants equals more rent. We have seen cases when revenue has increased by 300% when compare to a standard Buy To Let. It makes perfect business sense.

Q. What property makes a good HMO conversion?

A. The good news is that most properties are ideal for conversion. This can be anything from a three-bedroom property, former police stations and fire stations, old churches, hotels and factories and halls of residences. The main point to consider after you’ve found a property ready for HMO conversion is that it is in the right location. Anything that is near to a university is ideal as this means that you have a ready-made audience in students. Also a property that is close to good transport links is worth considering for obvious reasons.

Q. What’s the thing that people often forget when they look at converting a property into a HMO?

A: At Reka we see people get really excited about a building that they’ve bought and the prospect of converting it into a HMO, but they often forget that there are tight regulations around conversions, and you need to comply with these. To convert a property to a HMO you need to obtain the correct license. This can be obtained from the relevant local authority. The property needs to be compliant with certain safety measures too. Sometimes this can be overlooked. We often help clients with this as we know most councils and because we know what’s required it can speed up the process and save them time and money.

Q. What do most people underestimate when they start a HMO conversion?

A. It’s almost always budget. You have to be realistic about the costs involved. Being realistic about how much it costs to convert will pay dividends. The cost of construction and building materials has escalated since the pandemic and the rise in living costs. We always tell our clients that they need to factor in a 10% contingency and the importance of employing reliable workmen. We have an army of reputable craftsmen who understand budgets, timelines and good workmanship. So we are often asked to undertake this for our clients to facilitate a speedy conversion.

Q. What does success look like?

A. This is perhaps the most important consideration. When you start your conversion journey you need to have a clear vision of what the end product will look like. Plan and budget accordingly. And also we tell our clients that once the conversion has been completed, the real work starts! That means that you need to consider how you will ensure that you have the right tenants in your property. Again, this is a service that most clients ask us to implement once we’ve completed their conversion.

Q. Any take aways that people should remember?

A. Well, it’s easy for us to say as we do this for a living, but the main thing to remember is that HMOs are a great investment, however, they do require thought, planning, budget management and patience. However, as previously mentioned the return on investment can be very worthwhile, which is why we work with many clients who begin with one property and now have enviable property portfolios.

Q. How can Reka help?

A. Property Management and HMO conversions is our business. It’s what we’re passionate about and why we have a 5 star review listing on Google. We help plan, develop and manage properties for our clients and we think this is because we are landlords too, so we understand it from their perspective. We know the pitfalls, can negotiate with councils and workmen and also believe that everyone deserves a place to call home, so are able to understand what tenants’ requirements are too.

Have a look at a HMO case study which demonstrates how to do it!

If you wish to discuss any of the information raised in this blog, please do reach out to our professional and friendly team who can discuss this further with you.

Email us to start the conversation.