Should you invest in HMOs outside of Major Cities?
Forth Action Invest on December 5, 2024
For years, the North West has been a hotbed for HMO investments. However, with a shortage of suitable conversion properties and increasing Article 4 legislation tightening development opportunities, many investors are left wondering: where should they look next?
Traditionally, the advice has been to focus on major cities with strong transport links, business hubs, and urban amenities. While this strategy holds some merit, suburban towns with robust economies, growing employment opportunities, and demand for housing often
fly under the radar.
Expanding Beyond Manchester, Liverpool, and Salford
—
Major cities like Manchester, Liverpool, and Salford have attracted substantial interest from both domestic and international investors—and for good reason. These cities offer steady rental growth and reliable capital appreciation. However, smaller towns on the periphery of these cities present compelling opportunities for HMO investments.
Here’s why:
1. Less Competition
The HMO market in major cities is increasingly saturated, with rising property prices and renovation costs driving fierce competition. Tenants in these areas often have access to a wide range of high-spec properties with en-suites, kitchenettes, and other premium amenities. By contrast, smaller towns face less competition, making it easier to secure tenants and achieve occupancy goals.
—
2. Higher Rental Yields
Suburban properties are often more affordable than their urban counterparts, offering higher rental yields for investors. Lower purchase prices also allow investors to diversify their portfolios across multiple projects, reducing risk while maximizing returns.
–
3. Brand Building Opportunities
In larger cities, established HMO developers and corporate entities dominate the market, making it difficult for smaller players to stand out. In smaller towns, however, the competitive landscape is less crowded, giving new or emerging developers the chance to establish a strong local presence and build their brand with tenants, agents, and the community.
–
4. Increasing Demand
The shift toward hybrid and remote work arrangements has changed the housing landscape. Many workers now prioritize quieter, more affordable living environments with the option to commute occasionally. Smaller towns offer a safer, more convenient lifestyle while still providing proximity to major cities when needed.
—
Investing in HMOs outside major cities provides a unique opportunity to capitalize on higher yields, reduced competition, and increasing demand. As the housing market evolves, forward-thinking investors would do well to explore suburban towns with thriving local economies and growing employment prospects. These areas are poised to become the next big opportunity for HMO development.
In the coming months we will be releasing a FREE guide on scaling a HMO business to 6 figure profits – REGISTER YOUR INTEREST HERE “ and a free copy will be sent to you once available”