Does every HMO tenant want an en-suite? Probably. Can they all afford one?

Ideally, does every HMO tenant want their own en-suite? Probably, yes. Can every tenant afford the jump in price that's being charged to cover the cost of an all en-suite conversion? Probably not.

So the question to answer, if you're planning an all en-suite conversion, is this: are there enough tenants in your location and target market who can afford en-suite rooms, for the long term, to give you healthy occupancy at the room rates you need? It matters most when squeezing the en-suites into the layout is sending conversion costs sky high.

An example

Take an area with a low average wage, where most HMOs are occupied by blue-collar workers. These towns usually have plenty of cheap Victorian terraces ripe for conversion.

You can usually get four en-suite rooms out of a traditional Victorian layout without too much bashing about: the two former reception rooms and the two larger bedrooms. But to get the other two en-suites into a six-bed, you start knocking walls down, putting in steels, a maze of waste pipes and extra costs.

To get those two extra en-suites, the project goes from £70k to £150k in a flash, and that's then justified with room rents of £110 a week to make the conversion stack. Are there enough tenants to fill it at £110 a week, consistently, for the long term? Or will your rates slide over 12, 18, 24 months?

The alternative

Keeping it as a six-bed with four en-suites and two rooms sharing a bathroom could avoid the expensive remodelling. The build could come in at £85k. Room rates could end up at four at £100 and two at £85, which appeals to a much broader range of tenants, slides less over time, and keeps people for longer.

Plenty of properties suit an all en-suite conversion without it being needlessly expensive: commercial-to-residential gives you room to play with space, and some larger houses have big natural rooms in the existing layout. In those, all en-suite is a no-brainer.

But if you're fixated on all en-suite, and it pushes costs so high that your rents end up even 10–15% above what's sustainable, you may be pricing the room out of reach of the very tenants who'd want it. Many would be happier in a well-priced, quality room at £85 a week, sharing a modern bathroom with one other person.

Which landlord gets the better occupancy?

First posted on my Facebook page. Lightly edited.