Today, private rented accommodation accounts for one fifth of all homes in Great Britain and is an option that’s very popular with students, young professionals and single people.
Demand for houses in multiple occupation (HMOs) - where each individual bedroom in a property is let with facilities shared and paid for by at least three unrelated individuals – is increasing as people look for a more social and affordable way to live.
With greater potential for higher yields and higher monthly profits than traditional buy-to-lets, HMOs have become an appealing choice for many landlords. However, these benefits come with additional responsibilities and it’s important to be aware of these before starting out.
The main advantage of an HMO compared to a standard buy-to-let is the potential for higher rental yields. Several sources of income from one property means you’ve got the opportunity to generate more rental income than if it was let to one household and you’ll be less exposed when a tenant leaves or falls behind with the rent.
However, HMOs do require more management time and costs than a standard rental property. There are many things to consider such as obtaining a license, making the property fit for purpose, maintenance, utility bills, insurance and finding multiple tenants.
This is an important question for new HMO landlords to answer. Generally speaking, any property with five or more people from two or more separate households that share facilities will require a license.
However in some areas, smaller properties with fewer tenants can also require a license so it’s important to check the policy with your local authority before proceeding.
A license must be obtained for every qualifying HMO property and will be valid for a maximum of 5 years.
Given an HMO has more than one household under the same roof, it follows that legal obligations to ensure the property meets and maintains the correct standards are more involved than for a standard rental. Here is a selection of some of the key issues you need to be aware of:
Houses in multiple occupation require a specialist HMO mortgage. Securing finance for property investment is an area that’s constantly changing so it’s important to get expert help in finding the best HMO mortgage.
The key to success is to do your research. There’s a lot of useful information on Government and local council websites that will help you to plan. At Vincent Burch we can also help so why not contact us today and speak to one of our experienced HMO advisers for help in finding the best loan to suit your needs.
Please note we are not tax advisors or accountants and do not offer tax advice. You need to speak to your own tax adviser or accountant to see what the implications would be based on your own personal circumstances.
Advice that’s tailored to your own bespoke situation.
Enter your contact details and we’ll contact you back within 1 hour (during normal business hours).