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Why HMOs are actually a great investment

Posted by Alexander Hartmann on February 6, 2025
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Since 1992, the UK Government has embraced refugees and asylum seekers through its resettlement program. Initially managed by the Home Office, the program has shifted to private sector oversight. By the end of 2020, UNHCR statistics revealed that the UK had welcomed 133,094 refugees while 61,968 asylum cases were still pending. Unfortunately, most asylum seekers are not permitted to work and often depend on state support, including housing assistance.

Key Housing Providers for Asylum Seekers

The Home Office partners with three main providers to facilitate housing for asylum seekers:

  • Serco: Operating in the North West of England.
  • Mears: Managing the North East of England.
  • Clearsprings: Overseeing the South of England.

The Impact of COVID-19 and Rising Migration

In 2020, the UK witnessed a significant increase in migrant arrivals via the English Channel, compounded by the COVID-19 pandemic. Historically, processing legal asylum requests took around five years per applicant, but the pandemic has extended these timelines. During this period, asylum seekers are protected from deportation under international law and retain their rights within the UK.

Temporary Accommodation and “Operation Oak”

Currently, approximately 10,000 asylum seekers live in temporary accommodations, including hotels and former military barracks. The UK Government’s “Operation Oak” aims to transition these individuals into permanent housing, although it has coincided with reports of increased domestic disorder. This situation highlights the urgent need for permanent housing solutions, with the Government indicating a requirement for at least 2,000 additional properties.

Investment Opportunities in Asylum Seeker Housing

The rising demand for housing, coupled with limited supply, creates an attractive investment opportunity. The UK Government has placed the responsibility of accommodating all asylum applicants with the three main housing providers, presenting benefits for both property owners and tenants.

Exploring HMOs (Houses in Multiple Occupation)

What Are HMOs?

Houses in Multiple Occupation (HMOs) are properties rented by three or more individuals from different households who share facilities such as bathrooms and kitchens. Investing in HMOs can be especially lucrative, often yielding higher rental returns compared to traditional single-let properties.

Benefits of Investing in HMOs

  1. Higher Rental Yields: HMOs typically generate greater rental income than single-let properties.
  2. Diversified Risk: Multiple tenants reduce the risk of void periods.
  3. Increased Demand: HMOs offer affordable housing options amid rising rents and housing shortages.

Special Benefits of HMOs Rented by Serco

Understanding Serco’s Role

As a primary housing provider, Serco manages asylum seeker accommodations in the North West of England. Their longstanding partnership with the Home Office ensures that properties comply with necessary standards, delivering safe and secure housing for asylum seekers. Serco’s role underscores the important contribution of the private sector in meeting the housing needs of this vulnerable group.

Key Advantages of Investing in HMOs with Serco

  1. High Yields: Earn up to 9% net yield.
  2. Net Income: Council taxes and utility bills covered.
  3. Maintenance: Day-to-day maintenance and repairs managed by tenants at no cost to landlords.
  4. Fixed Lease: Benefit from a 7-year government lease with renewal options.
  5. Stable Income: No void periods.
  6. Reliable Investment: RICS valuations available for HMO properties.
  7. Low Maintenance: All Serco properties are overseen by in-house Housing and Maintenance Officers.
  8. Government Backing: Enhances security and stability for investments.
  9. Mortgageable Properties: Landlords can secure mortgages as HMOs with a government lease are bankable.
  10. Trusted Developer: Bluerock Development has successfully completed over 100 projects with Serco, making it a reliable partner for investors, especially those outside the UK.

This government-backed investment allows investors to secure their financial future while benefiting from an appreciating asset.

Join Our Upcoming Webinar

If you’re interested in learning more about HMOs, particularly those rented by Serco, we invite you to join our upcoming webinar:

  • Date: Wednesday, 12th February 2025
  • Time: 4 PM GMT
  • Register by following this link.

For further inquiries, feel free to contact our team member, Mr. Alex Churchill, who will be happy to assist you with any questions. Find his contact details here.

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