The most common form of buy-to-let investment made up of several fairly simple steps. Firstly, find your ideal location. Secondly, find your ideal tenant. Next, crunch the numbers and make sure everything adds up. Lastly, keep the tenant happy and you’ll find yourself earning a constant stream of rental income.
While this is an oversimplification of the process, it’s a good example of one of the easiest ways to get into the property investment market and a staple of many successful investment portfolios.
- Easy to understand
- Predictable returns
- Minimal management time (especially if you consider a letting agent)
- Lower returns than other Buy-to-Let opportunities
The basic definition of an HMO/House Share is a property where each room is rented out on an individual basis. As you’d imagine, HMO’s are popular as they allow for higher rental income. A bigger property can have rooms converted into bedrooms, creating the potential for more tenants and thus more money.
Unfortunately, a by-product of more tenants is more time spent managing the property. There’s also the potential for more wear and tear. The more tenants, the higher the chance the property may need maintenance down the line.
- Higher potential rental income
- Diversified rental streams – if one tenant leaves, you still have others to avoid void periods
- Increased chance of necessary maintenance
- Harder to find a mortgage
- Tighter regulations than Single Let
Although targeting student tenants could technically come under the HMO strategy, it’s a vastly different market and warrants individual consideration. Many investors choose to opt for a strategy built around students as they represent a predictable and consistent stream of rental income.
Management is generally easier as landlords know that each tenant will be signing up for a certain period of time and they’ll always be a stream of new students to take their place. If you buy into popular stereotypes than the idea of housing several students may turn you away but the potential for income is considerable.
- Increase rental income
- Predictable cycle of tenants
- Consistent stream of tenants looking for accommodation
- Potential for more wear and tear
- Challenging market with purpose-built accommodation