property investment

If you’re considering renting out your property for other people to live in, then you face several choices between several different types of arrangement. Of these choices, among the most important is between a House in Multiple Occupancy and a Single Let agreement. But what’s the difference between these two arrangements, and what does that imply for the profitability and sustainability of the enterprise.

What is an HMO?

The term ‘House in Multiple Occupation’ (or HMO) refers to any property in which three or more tenants live, forming more than one household. So, while there might be some communal facilities shared by all occupants, everyone gets their own lockable bedroom.

Arrangements of this kind tend to limit costs for everyone. This makes the preferred by students and young professionals who don’t yet have a stable income stream. You can usually find HMO furniture that’s made to match with properties of this sort.

What is a Single Let?

A single let is any property which you’re letting to just one person. Once the contract is sorted, you can generally just allow these tenants to get on with life, intervening only to perform regular maintenance. Since there’s just one tenant there, you are likely to face less frequent problems.

Now that we’ve got those terms explained, let’s think about why we might prefer one arrangement over the other.

Why an HMO?

HMOs tend to have a higher ceiling when it comes to overall rental yields. You might expect to get triple the takings from an HMO than you get from a single let, even when other factors are held equal.

Moreover, the demand for an HMO is usually more resilient to changing economic conditions. Even if the country enters into a recession, you can be fairly sure that there will be demand for housing of this kind. For this reason, it’s widely viewed as a safer bet in the long-term.

HMOs are also more stable – if a single tenant moves out, then you’ll still be generating rent from the rest of them. Unless you have a mass exodus, this means less downtime.

Why a Single Let?

Single-let properties tend to be easier to live in, since there aren’t other personalities in the house to clash with. Thus, you can generally expect tenants to stay a little bit longer than they otherwise might have.

The simplicity of a single-let arrangement can also be a boon. While you might be able to charge more for a HMO, this is often offset by accelerated wear and tear, and callouts for failures. If you’re looking for an easy life, in other words, then a single let is usually a safer bet.

When choosing between HMO and Single Let, you’ll also want to think about the location you’re letting in. Often, this will have a huge impact on the type of demand for your housing – do your research before making a decision.

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