The Key Considerations When Buying A Residential HMO Portfolio

The Key Considerations When Buying A Residential HMO Portfolio

Sam Light Blue

Within Scotland’s major cities, students are finding it harder and harder to find term-time accommodation with the sharp decrease in stock levels and increased tenancy lengths compounding the problem.

As such the room rates for Houses of Multiple Occupation (HMO) catering to the student market, have soared to around £800 per room, per month, within Edinburgh. With some purpose-built student accommodation in Edinburgh advertising rooms for between £225 per week (£900 per month), and £433 per week (£1,732 per month).

At Gilson Gray, we are constantly applying an Asset Management mindset towards the properties that we manage, reviewing with Landlords as to how best we can optimise the performance of their assets.

As asset classes go within the residential property, non-HMO 3-bed flats can be among the poorer performers. They appeal to a limited portion of the market, who, in many instances, do not want to pay a premium for the 3rd bedroom. As such 3-bed flats only amount to 5.2% of the market’s stock, meaning that these properties have a higher average time to let with only 19% let within a week and 70% let within a month.

They have also experienced the leanest increase in rents since the 3rd quarter of 2020. Where average one-bed prices have increased by 27.76% and 2 beds by 31.56%, 3 beds have only increased by 18.9%.

Working alongside our Licensing team we have undertaken suitability studies and costing analysis to advise landlords of the feasibility of maximising the potential of their property by obtaining an HMO Licence. As a full-service firm, working with other departments, such as our Licensing team allows for seamless property management and HMO licence management which can be a daunting task for HMO operators or investors.

Below is a case study which that outlines how the implementation of this strategy created a better-performing asset for the Landlord –

In 2023 we undertook an exercise to advise the landlord of a 3 bed property on Marchmont Road on how best to maximise their investment. We obtained specialist quotes to make the property complaint and assisted the client with the licence application.

Previous Rent £1,500 per month, £18,000 per annum – Oct 2023

New Rent £2,250 per month, £27,000 per annum – February 2024

Compliance works – £3,995.00 + VAT

HMO licence fee £540

If you operate or are considering operating an HMO property and would like to find out how our services could assist, please do not hesitate to get in touch with us to discuss your specific needs or concerns!

Sam Paulo
Head of Lettings


All statistics quoted are courtesy of CityLets’ quarterly reports.

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