North West HMOs outperform BTL investments

Rozi Jones
18th August 2015
Student House

HMOs are outperforming single occupancy buy-to-let investments and this is driving investment in student HMOs in the North West, according to The Mistoria Group.

Recent analysis comparing HMOs rented to young professionals against standard single occupancy buy-to-let investments, equities, gilts, commercial property and cash – has found that that HMOs were by far the best performing asset class over the four year period from 2010-14.

Mistoria’s data shows that HMOs rented to young professionals and students had a total geared return on equity of 122% over four years, compared to 77% for a standard BTL property (with a 75% loan-to-value mortgage).

Since 2010, Mistoria has seen a surge in investors acquiring HMOs in the North West, up 89% over the last four years. Every £1,000 invested in HMOs in the North West in 2010 would have grown to £2220 by 2014, while for a standard BTL, property this would have reached £1,770, a difference of £450. Average total gross rental yields for the 2010-14 period for HMOs in the North West were 14%, compared to 9% for a standard BTL property.
The average price paid for a standard BTL property in 2010 was £107,500, with a cash gross rent of £9,675. The average price of a four bed HMO in the North West is £125,000 and the cash gross rent of £17,500.

Mish Liyanage, Managing Director of The Mistoria Group commented:

"HMOs in the North West provide excellent returns and are clearly outperforming BTL investments. We have experienced a sharp increase in demand from investors looking to acquire HMOs for professionals and students over the last four years.

“An investor currently can 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.  

“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.

“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.”

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