Costs to consider when buying a student (HMO) property investment
This article lists some of the costs landlords incur when buying a student (HMO) property investment
- Purchase price
In areas where article 4 is in place landlords selling a property that has previously been run as a HMO property can charge a premium as the number of allowed HMO stock is limited.
- Sourcing Fees
Some landlords enlist the service of a professional property sourcers, especially if they live overseas. Property sourcer will help you identify a suitable property investment, do the viewings for you and manage the purchasing process. Some sourcers also offer a refurb management service where they source local contractors and arrange and manage any refurb and maintenance that needs to be done at the property.
- Stamp Duty
Buy-to-let investors in the UK incur a stamp duty tax. Depending on the purchase price the tax is as per below.
- Conveyance fees
This cost covers the legal work involved in the property transaction and can vary based on the complexity of the titles, search results and ownership set up.
- Mortgage broker fees
Not all underwriters will lend money on a HMO property. We advise you look for a specialist HMO mortgage broker to find you the most suitable mortgage for your individual case. Specialist mortgage brokers can be more expensive as more work can be involved in finding a specialist mortgage vs a residential mortgage.
- Refurb fees
HMO properties need to comply with certain regulations and if the property doesn't already have this the new owner will need to install fire/ smoke alarm systems, fire doors, potentially additional sinks and counter space in the kitchen, etc. The new landlord may also need to reconfigure the layout of the property if they wish to add additional bedrooms or meet bedroom minimum size requitements.
- Ongoing maintenance fees
Student accommodation has a higher wear and tear than residential property. Student tenants, for the most part, change their property annuallywhich means the moving in and out of belongings alone will leave traces. HMOs also have a higher number of occupiers and they in return will bring their friends around. The most common maintenance issues found in student accommodation are : leaks from clogged drains, clogged back yard drains from putting things down the drain that the tenants should not, worn and mouldy grout/ bath sealant, overflowing rubbish and lost keys.
- Letting & Management Fees
If you are not experienced in the letting and management of student (HMO) accommodation we recommend you give your property to a specialist student letting agent who has all the systems and processes set up to look after your investment.
- Accountant Fees
Depending on whether the property is held in the landlord's personal name, through a company or through a JV set up and based on the landlord's knowledge of the different accounting rules an accountant is required for the annual tax returns. We recommend seeking out a landlord who has specialist knowledge about the different tax laws regarding property investing for the best advice.
Student accommodation is let on a furnished basis. Generally this means:
- coffee table
- flat screen TV
- dining table & chairs
- appliances : fridge, oven, washing machine (microwaves and other appliances are optional and depend on the rent you are looking to charge)
- ideally a double bed
- chest of drawers
Items that need to be replaced the most frequently:
- bed slats
- broken drawers & wardrobes
There are specialist student furniture companies who will deliver and assemble all new furniture and remove the old one, an ideal service for overseas investors or investors who do not live close to their investment property.
If you have any queries, comments or overall feedback we’d be happy to hear from you or for more information about student accommodation visit our Support section or contact us via firstname.lastname@example.org.