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We have a few voids in our Reading HMO rooms at the moment we have never had before. The ratio of rooms wanted to rooms available in Reading used to be highly favourable but has plummeted in the last few months. We put a stopper on buying HMOs in Reading last year due to steep prices, but have also recently put further R2Rs on hold too till we see the effects of the pre-April buying spree work through into the market...I wouldn't be surprised if the over supply of rooms (at least high end rooms) continues to worsen in the coming quarter. Other Reading landlords seem to be experiencing the same issues.
My question is what steps would you take to succeed in a saturated market? Quality of product is certainly important and beautifully staged rooms...but there are a lot of really nice rooms on the market. Service should be important but that's harder to demonstrate until a tenant has been with you for a little while. With pricing we're generally positioned just below the most expensive rooms on the market.
Interested to hear any ideas, and even lessons from other industries.
Thanks & regards,
* New build residential developments and flat conversions in the Home Counties* High end HMOs in Reading and Bracknell
I believe the increasing number of high end HMOs aimed at young professionals is a trend that is being experienced across many parts of the UK. Over the last 5 years in Cardiff I have noticed the number of rooms aimed at professional’s increase as student landlords are being forced out of the market by purpose built student pods.
My solution has been to operate in a less crowded market where competition is minimal and entry costs are a fraction of those needed to compete with high end refurbs and feature walls needed to attract professional tenants who are having to pay less rent due to ever increasing supply of “professional lets”.
According to spareroom’s index the average monthly rent for a room in Cardiff is £342, however, I am able to achieve £450 pcm renting to my new tenant demographic. Looking at the numbers for Reading spareroom’s index is quoting £528 and I could achieve a room rate of 663 pcm without the need of ensuite rooms, feature walls and expensive refurbs.
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HMOs are not my area so I will let others comment on that. I have a single let house in Reading that I had to relet recently. I went on right move to gauge rental values and was blown away by the number of rooms available. A lot were high quality.
When I bought the house in 2006 I did actually let it as an HMO and all it took to fill were a few ads on gumtree. It wasn't a slum by any stretch but it wasn't anywhere near the standard of most available now.
Not an ideal option perhaps but there may be merit in converting a few to single lets?
Reading has a lot of IT workers, many on contract who will be working away from home during the week and commuting home of a weekend. I'd suggest trying to find a way of tapping into that - several ideas ocurr to me - contact recruitment agencies (I know there are a lot of these!) and tell tham about what you do - it could be very complimentary as I bet there are no agencies who help their contractors find accomodation. Also maybe talk to Oracle, HP and the likes as they will emply a combo of contract staff and young graduates. Also Bracknell close by has many IT companies. In fact there are many staff who work away from home where a short term let would be more economic for them than hotels. Worth generally conatcting bigger employers and seeing if you could be on their preferred supplier list. Maybe serviced apartments also? I have a one bed flat in Kingston, it rents for £1100pcm but there are identical flats in the same block that have been turned into services apartments and rent for £896 per week. Just a few ideas.
Hi Guy,We are hearing of this more and more.See - HMOs - My little goldmine Having said that, maybe it is a temporary issue. Reading is supposed to be benefitting hugely from CrossRail, so maybe more people will be moving into the area?Perhaps turn the houses into serviced accommodation?!
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
Cardiff hmo landlord ...got my attention we seeing alot of hmos refirbed to a great standard being sold at daft weekly rents no way achievable we happy to advise about the long tern achievable rents in Doncaster Barnsley and Lincoln . Like you we have I believe a similar model always interested in what works in other similar areas to ours??
Kim Stones Kimcoh Properties 07979690484 / 01302 562788
If we remain in the EU there is expected to be another 3 million migrants in the next 10 years
There is nowhere currently for them to stay
So such room strategies as you are all devising will be required especially in the South East.
The only fly in the ointment is Council Tax banding and possible future licensing requirements etc.
But if you provide the rooms they will surely come
A big issue is whether mortgage lenders and freeholders will permit things like serviced apartments etc.
Lots of LL will operate illegally as the financial rewards are too great
As quoted a service apartment achieving 3 times what a single let will achieve
This will tempt many LL into illegal operation!
The pressure on accommodation requirements is just plain unsustainable
Utilising single let property illegally for rooms etc at far higher rents will become a norm
The authorities show no real willingness to prevent or stop this and nor for that matter do lenders!
CardiffHMOLandlord: there could be a similar issue in Reading also as more purpose built student accommodation is going up, although a large proportion of the traditional landlord student accommodation is in less desirable areas for the professional market. Congratulations on identifying your new tenant demographic!
J R Armstrong: single lets (houses) are faring a bit better in Reading…the stampede seems to have been more for providing room lets. The quality of rooms being offered now is a good thing in that it means more tenants are getting a better quality product…that said there are still some really dreadful rooms being offered on the market and it is still surprising what some tenants seem to put up with. We have been careful not to over-HMO our HMOs so they are easily converted back into single lets.
Paul J: there do seem to be some good short-term let prospects in Reading (e.g. 2-4 months) but that tends to upset our houses when the turnover is higher. We could though look at potentially identifying one or two rooms that we try on shorter term (our current minimum is 6 months). We have reached out to big companies but no traction there as yet…good idea on recruitment agencies. We have considered serviced apartments but that has also become a bit of a hot strategy and a lot of people are now doing it in Reading…and there are some complications with lender comfort/legality (or landlord comfort in the case of R2Rs).
Vanessa: thanks, I hadn’t seen the Goldmine thread before…I tend to pick up on PT threads via Feedly…I need to make time to check in more directly! :-) There is a possibility that the market will right itself a little…a lot of folks entered the market through to April and many of those rooms are yet to hit market (i.e. refurbs to complete)…Cross Rail has certainly brought a lot of non-local investors to the market.
Paul B: good point, the long term fundamentals would appear to be strong in terms of migrant fuelled demand with remaining in the EU. Council Tax banding is a nasty little initiative…I would hope in time there might be a new band brought in for rooms...but Reading Council is reeling from cuts (and massive further cuts still required) so revenue generating ideas are to be expected. Yes agreed on serviced apartment issues with lenders and freeholders.
Also keen to see what folks have found works in other saturated market places (i.e. other industries). The standard response is to differentiate (distinctly different or better than what’s available), find or create a new niche, or compete on price. Competing solely by cutting prices though appears to be a race to the bottom.