Industry Insights

Focus on... investing in Southampton HMOs

8th August 2017

Southampton is constantly referred to as a ‘buy to let hotspot’ in the media. HSBC ranks Southampton among the top 10 places to invest in property in the UK, and Southampton is tipped to register the highest capital growth in the country by 2019.

Southampton is currently undergoing massive transformation. Westquay Watermark is now complete and represents an £85 million investment in Southampton and is the UK's largest restaurant and dining complex. The Royal Pier development project is a £450 million development that will transform the landscape of Southampton’s waterfront.

Southampton is a fun and vibrant place to live, and with its two universities (34,000 students), a large hospital, an airport and its location on the South Coast with proximity to London, there is high demand for HMO rooms.

The HMOs we source, refurb and manage for ourselves and investors are largely for professional tenants. The typical tenant might be a young person aged between 23-35 who is re-locating to Southampton for a job. They will usually require an initial 6 month contract after which time they may move in with friends or with a partner, or indeed move to a different area of the country for work.

Southampton is an Article 4 area which means that you can no longer change a family house into an HMO without planning permission in Southampton city centre. This means that you have to look outside the article 4 boundary for suitable investment purchases which can be converted into HMO properties without planning permission, or buy an existing HMO being sold on by a landlord.

Southampton has mandatory and additional HMO licensing. Regardless of HMO licensing, our properties are always refurbed as if mandatory licensing were in force in the area. Be aware that new HMO rules mean that the HMO licensing net is likely to be cast much wider in the near future, see my video on this here: https://www.youtube.com/watch?v=McjRNLnd5VQ

We have noticed that due to lots of new all purpose student blocks going up in central Southampton (with inclusive gyms and bells and whistles), there are more traditional student houses remaining void - especially the shabbier ones. As a result some student landlords are changing those properties to professional HMOs for which the market is strong. As with all buy to lets, the key is to stay ahead of your game in terms of the property you are offering so it will always be attractive to tenants.

As HMO properties typically net over £1000 pcm in profit, you can see why this asset class is becoming more and more popular with investors. Some people worry that they have no knowledge or experience of HMOs, or no time to manage a property where everyone is on separate contracts. Look into your network for an agent or someone you trust who will guide you through the maze of rules and regs, hmo amenity standards, health and safety and fire legislation, licensing, planning legislation. Someone who could recruit and manage the tenants and the repairs, leaving you free to watch the profit drop into your account each month.

Southampton is booming and we at Home Hub Southampton are enjoying being part of it.

Posted by:

Sarah Smith

Southampton Property Meet

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