17th Mar 2018
Q: Can I use my property as an HMO and how would this benefit me?
A: An HMO is a house occupied by more than two people who are not members of the same family. The ideal property for an HMO would be a house or a large apartment with two plus bedrooms excluding the lounge. It would be ideal for the lounge to be enclosed, and not open plan with a kitchen, as this could be used as an extra bedroom.
More often than not, your property will fall into the category of HMO if it: has three habitable floors; has at least two/three unrelated tenants who are not members of the same household; has a number of tenants who have separate agreements; is a bedsit or hostel-type of setup; is student accommodation; is a building which was converted into a number of self-contained flats but does not yet comply with the 1991 Building Regulations. Do not take this list as gospel, as this varies from council to council. It would be best to check with the local housing department in the area.
It is not easy to set up an HMO, so you need to ask yourself if you prepared for some start-up costs, improvements and changes to comply with the regulations. Becoming an HMO landlord is a whole different kettle of fish to an AST tenancy. It will start with talking to your mortgage lender about a specialist mortgage – they may not allow you to purchase an HMO, or intended HMO, with a standard buy to let mortgage, so it is best to double check.
Even if your new investment property is already set up as an HMO, it will require a licence in your name. The licence entails inspections, fees and will need to be renewed every twelve months. Complying with the inspections will mean installing some of the basic requirements, for example, fire alarms must be installed in all bedrooms and shared areas, with heat detectors supplied in the kitchen; fire extinguishers; illumined means of escape must be provided; gas supply and fittings must be checked by a registered engineer annually; electricity safety checks must be carried out every five years; the facilities supplied must be suitable for the number of tenants living in the property; and remember all communal areas must be maintained to a reasonable standard by you.
In terms of the benefits of an HMO, the biggest benefit to you would be the financial side, as you could potentially take a standard £500 per week property, rent it out to say four people and charge £250 per room per week, increasing your weekly income by 100%.
Being an HMO landlord is more for the serious landlord, who is prepared to invest time and money for a better return. It’s not for the fainthearted, however, if this sounds like your kind of challenge, the rewards can be substantial. We can support you, whether you want to manage your own properties or take advantage of our fully-managed service.