Everyone knows that student HMO’s are vacant at the moment. But have you thought about what effect that will have on you?

Although I am not a massive HMO investor with only two of my own; I’m interested, as I’m sure some of you are, to know – how will vacant student HMO’s have on other HMO’s? Well, below we’re going to try and shed some light.

Due to the current pandemic, empty student properties are a very real and ever-increasing reality for many HMO landlords. Usually, landlords would get their student accommodations ready and occupied for the September semester during February – March months. Obviously, with the lockdown, this hasn’t been possible this year.

Even as we’re returning to ‘normality’ (whatever that is), a lot of education is still running virtually, thus reducing the need for students to have local accommodation. On top of that, a lot of students invest in university for the 360 experience – including the social benefits and drinking culture. With this temporarily removed, will there be a decline in demand for high education this year? Potentially.

Property markets have a lateral and knock-on effect to each other; one of the main reasons I love to be invested in the industry as a whole, rather than just my specified market. I see it this way… student-occupied HMO landlords have two options: either leave their properties empty or run them as a normal HMO. Leaving the property empty is presuming that the market is going to continue as normal in what is undeniably an uncertain time, and running it as a normal HMO means competing with the existing landlords occupying that market. Neither of which are ideal – but what is for sure, is that renting your property out between now and January (at the earliest) is going to be tougher.

So how will this affect residential-style HMOs, with working or benefit tenants? Firstly, the market could become more saturated if student landlords do decide to pivot to residential HMOs temporarily. This opportunism will cause a flood of rooms, and potentially cause existing landlords to drop out of the market. Despite this being a risky strategy, a lot of mature landlords have already thrown in the towel due to the number of recent changes. Although initially the market will be saturated, if enough of the original landlords do decide to drop out, room prices could eventually go up due to the lack of stock – meaning a massive reward for the student HMO investors. A very risky game; one that could pay off well, but also with the potential for huge downsides.

But that’s property, isn’t it? At any given time, especially with HMOs, you could have a period of time with little or no tenants – which is problematic when you have more than a handful of investments. Although you can do everything in your power to make a safe investment – such as choosing a strategy to meet your location, eg. housing benefit tenants up North or being in a university area for student HMOs, nothing is ever guaranteed.

To summarise, my thoughts are that a few things could happen. The most prominent being that this will create the opportunity for landlords to exit, which will, in turn, mean that more properties may come onto the market. Most likely, we’re going to see properties be re-purposed for different uses – which may not be a bad thing. As I always say, you have to adapt! If COVID has taught us one thing, it’s that.   

I want to hear your thoughts! How do you predict vacant student HMOs will affect other HMOs? Or even the wider market? I’d be really interested to know of any other knock-on effects you guys are expecting, as well as any strategies landlords could approach the problem with. Let me know in the comments!

And remember, if you don’t evolve your ideas, you’ll never live on your own terms.