New research into the North West housing market has shown that HMOs are outperforming single occupancy buy-to-let investments.
A survey conducted by The Mistoria Group suggests that this is leading to further investment in student HMOs in the region.
Young gains
Analysis comparing HMOs rented out to young professionals against standard single occupancy buy-to-let properties, equities, commercial property and cash, shows that HMOs were by far the best performer during the last four years.
Data from the Mistoria report shows HMO’s rented to young professionals and students returned 122% in equity between 2010014. This was in comparison to 77% for a standard buy-to-let property, with a 75% LTV mortgage.[1]
Since 2010, there has been a growing number of investors obtaining HMOs in the North West area. Investment in these types of property has risen by 89% over the previous four years. A £1,000 investment in HMO’s in 2010 would have risen by £2,220 by 2014. For a BTL property, this would have only reached £1,770.[1]
In addition, the average gross rental yields between 2010-2014 for HMO’s in the North West were 14%, in comparison to 9% for a standard buy-to-let property.[1]
Returns
‘HMO’s in the North West provide excellent returns and are clearly outperforming BTL investments,’ stated Mish Liyanage, Managing Director of the Mistoria Group. ‘We have experienced a sharp increase in demand from investors looking to acquire HMO’s for professionals and students.’[1]
Liyanage said that an investor can currently, ‘buy a four bed HMO in a good location for students and professionals, fully refurbished and furnished and tenanted for the coming year, for less than £150,000 in the North West based on 2015 prices.’ She believes that, ‘Investing in student HMO accommodation offers a long-term investment option, as the property is highly likely to be in constant demand throughout the calendar year. Typical rents are significantly higher for student properties, than a comparable buy-to-let property in the same city.’[1]
Concluding, Liyanage said, ‘A key driver for the rise in demand for HMO student property is partly down to the huge growth in student numbers over the last few years. According to UCAS, the domestic student population is continuing to expand, with an expected all-time high of 500,000 applications this year.’[1]
[1] http://www.propertyreporter.co.uk/property/north-west-hmos-outperform-btl-investments.html