Property Forum’s HMO series covers everything you need to know about sourcing, renovating, financing and managing a successful HMO (House of Multiple Occupancy) property. As well as being jam-packed with helpful links, facts, and guidance, our articles also contain professional tips from Property Forum’s CEO Nicholas Wallwork, as he draws on his 20+ years as a multi-millionaire HMO investor and developer.
In this article we discuss the different types of tenants who live in HMO properties and how you can ensure you attract quality tenants to your HMO.
Who typically lives in an HMO?
Given the price of renting an entire property these days, particularly in popular urban areas, it makes sense that HMOs are popular with tenants. For some, renting a room in an HMO is their only financially viable option. Others actively prefer the social aspects of living with a group of people.
In general, HMOs target the following tenant groups:
• Low-income or social housing tenants
• Professionals (usually young professionals waiting to get on the property ladder)
You’ll need to think about what sort of tenants you want to attract before you start sourcing a property or getting it ready to rent out, because different tenant groups have different expectations.
All three tenant groups have their advantages and disadvantages. Young professionals are seen as more reliable, but they’ll expect higher-quality accommodation, which means you may need to spend more on the property. Students generally create a bit more wear and tear, and they usually move on each year, but they’re pretty unfussy tenants that are easy to cater to. Social housing tenants attract a lot of stigma, but they can be a surprisingly savvy choice. For example, some local housing associations will rent an HMO for five years at a time, and cover all the utility bills and void periods during that time.
Pro tip: Never, ever mix tenant profiles in the same property. Young professionals generally won’t be happy to share with housing association tenants, and students usually prefer to live with other students. Decide who you want to deal with and create an offering that’s perfectly targeted to that audience.
How to attract quality tenants
First and foremost, the easiest way to attract high-quality tenants – people who will look after your property – is to provide high-quality accommodation that people actually want to live in and keep nice. Naturally, you’ll also need to keep your prices competitive in relation to comparable properties in the local market (overcharging just drives good people away).
Having created a desirable offering that’s just right for your audience, and deciding on a competitive rental price, you’re ready to start advertising your wares. Two popular ways of doing this are:
• Advertising online. SpareRoom is great for finding professionals who are looking to rent a room. It’s free to advertise on the site, but it may well be worth paying to upgrade to a ‘bold’ or featured ad, which gives your room greater visibility. Be sure to include plenty of detail in your ad, covering the room itself, communal facilities and the local area (especially transport links). Always include high-resolution, professional-looking photographs.
• Getting existing tenants involved. Once you’ve worked with tenants for a while, you’ll find that more and more prospective tenants come your way via word of mouth. In other words, your tenants can actively help you fill vacancies (which benefits them as they get to live with a mate rather than a complete stranger). Don’t be afraid to ask your tenants to spread the word among their social circles (social media is great for this). You could always offer them a small referral fee if they recommend a suitable tenant – it’s still cheaper than advertising, and it helps to strengthen the landlord–tenant relationship.
Carefully vetting your tenants
It’s absolutely vital you carry out a thorough reference check on every tenant before you sign a tenancy agreement with them. You could, in theory, do this yourself by talking to the tenant’s previous landlord, current employer and a couple of personal references. But the security and diligence of a professional tenant screening service is recommended.
Pro tip: Nicholas Wallwork always recommends having the reference check carried out by a third-party tenant screening service, because they’ll be able to conduct a proper credit check, which will pick up any bad credit or unpaid debts. Experian provides a good service.
To help this process along, it’s worth having tenants complete an application form which captures the following details:
• Name and date of birth
• National insurance number
• Current and previous address
• Contact details for current and previous landlords or rental agents
• Current income, employer’s name and address, and how long they’ve worked there
• Details for previous employer, if they’ve been in their current role for less than two years
Other articles in our HMO series explain how to vet your tenants properly and how to protect their deposits under landlord regulations. Use the catagory search menu at the top right of the page to see all other HMO articles in this series.