Occupancy is the only thing that matters with HMOs

Forget your boutique finishes, your refinance capability or your scatter cushions. It's month-on-month, year-on-year occupancy that makes a good investment.

Working across the whole country, in most buoyant HMO markets, the differences in how to fill an HMO and how to keep it full can be startling. I see first-hand how the best-run HMOs work, and why.

The key to success is understanding your tenant demographic and what makes them tick.

Certain tenant types respond well to a strict managing agent who insists on referencing and credit checks, but that can be an occupancy disaster for other HMOs in other areas. Large chunks of the HMO market survive on tenants who won't pass a credit check or don't want a guy in a suit doing inspections.

• A big share of HMO tenants are there to avoid going on the electoral roll, or to keep their head down for 6 to 12 months.
• Lots prefer to pay their rent weekly, in cash, rather than by monthly direct debit.

In Clapham, a one-bed flat for a professional tenant could cost over £2,000 a month plus bills. The same tenant can get an HMO room for £900 a month, all in. You can see the value of an HMO even for well-paid tenants.

In Stoke, the one-bed flat for a working tenant could be under £400 a month plus bills, and the same tenant can get a room for £80 to £110 a week, all in. So why would they choose an HMO when the price is that close? Because they won't pass the referencing the high-street letting agent puts up as a barrier, and they don't want to go on the electoral roll.

HMOs give them an easier way in, or at least the HMOs that are always full in your area do.

Are they bad tenants? No. Have they got a slightly chequered past? Probably. If you own an HMO in a blue-collar area and you want high occupancy, you have to find a model that works for this group of tenants. They are the HMO market in many areas.

It's not as simple as making your HMO the nicest on SpareRoom. That only lasts until someone develops a newer one next door. It's about catering for the bulk of the tenant base in your location.

Is it sustainable making six rooms at £120 a week in an area where most tenants want £85?

Reduce costs, rein in the vanity project and deliver a product that's affordable and solves the local housing need. That's what gets you higher occupancy.

First posted on my Facebook page. Lightly edited.