Buying land to build purpose-built HMOs isn’t really a strategy but we believe it can be. There are schemes to build “student blocks” but these are generally very large units of hundreds of rooms, very hotel like feel to them and in prime city centre locations, as such their price points are well above the average HMO tenant. From the other end of the HMO spectrum, the amenities provided in HMO conversions can be limited to the makeup of the original building.
- Any size plots
- Must be a great location
- Schemes must fit the Local Plan
- Long maturity period
- Buy land at great prices
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Configuration – In order to make this work, land must be bought for the right price in the right area. This is not about buying in a prime location but buying in areas close to the city centre. The land must also offer scope to develop the right scheme, particularly how high you can build. An HMO new build must be assessed on it’s rental returns per Gross Internal Area in order to assess if it’s viable to build. Bear in mind the building costs today are around £1300 per sqm in the North and many properties sell for that same value, so naturally there isn’t any profit to be made in building. Therefore, schemes must be large enough to be classed as a commercial building.
From a tenant’s perspective, large HMOs of 10 bedrooms and more can feel institutionalised, so like with conversions it’s important to design purpose-built HMOs around the needs and desires of the tenant profile. For example, communal facilities like laundry, games rooms, cinema rooms, co-working space, gyms and shop facilities.