With the property prices rising. With the energy prices skyrocketing. And with the council tax significantly increasing, it really is an important question to ask.
In most London areas, the HMO property is most profitable if property has at least 5 to 6 rooms that can be rented. More than 6 will require planning. But even with planning costs an 8 bedroom property would have better returns than 5.
We see many landlords who own properties with 7 or 8 rooms but only renting 6 rooms to avoid applying for the planning permission. I would strongly recommend increasing the potential of the property. To apply for planning for such a property, fees will be up to £3000 at most. Increased rental income for extra rooms will be much more significant.
Another important aspect is making sure the rooms can be rented by premium rents. This means that property has to be looked after with appealing interiors. Rooms must always be dressed up for marketing and viewings. And let’s not forget the service tenants receive. Because having long term tenants will keep your costs down. Most of our tenants stay 2 years plus or longer. Some tenants even have been with us 8 plus years.
If you have 6 bedroom property where each room is rented for £735, this will be £4410 rental income.
For a 6 bedroom property your bills based on the latest price increase will be about £740 (water, gas electricity, council tax, Internet, cleaning and small repairs).
Then taking in account the HMO Landlords insurance of another £45 per month. And Mortgage payments of about £800 – £2000 depending on when the property was purchased.
If you own one HMO property then it can be managed by yourself as long as all MHO Management regulations are met. Or if you prefer a professional to look after it and manage the risks, then it’s good to account for a management fee of about £530 depending on size of the property.
And taking in account the current market demands it’s highly unlikely to have any void periods if professionally managed.
So overall you would be looking at £2825 to £1095 monthly income after all possible costs.
This is just an average example and numbers can be different, but the main answer here is that if managed professionally, yes, the HMO properties can still bring a good monthly income for investors.