A house in multiple occupation (HMO) is a property rented out by no less than 3 people who are not from 1 ‘household’ (for example a family) but share amenities like the bathroom and kitchen. It’s also known as a “house share”.
What are the main benefits of investing in HMO Properties?
As with any kind of property investment, there are pros and cons of investing in HMO Properties that proprietors need to consider.
But there are some coherent benefits that HMO investment can bring if its done the proper way:
- HMO properties can give rise to higher rental yields than traditional buy-to-let properties, sometimes as much as four times bigger.
- The demand for shared living housing tends to persist strong against economic fluctuations and unpredictability, because of residents looking for inexpensive spaces to rent.
- When one resident decides to move, you still have other people paying their rent while you look for a substitution for the empty room
HMO properties, though, can be complex and are exposed to rigid regulations than typical buy-to-let properties.
On the other hand, you need to have a licence if you’re renting out a large HMO Properties in the United Kingdom. Your property is determined as a large HMO if all of the following apply:
- it is rented to 5 or more people who establish more than 1 household
- some or all residents use the same toilet, bathroom or kitchen amenities.
- at least 1 resident pays rent (or their employer pays it for them)
Even if your property is little and rented to one of two people, you may still require a licence depending on the district.
A licence is valid for a maximum of 5 years.
You need to renovate your licence previous to its expiration date.
You must have a separate licence for each HMO Property you own
You need to make sure:
- the property is appropriate for the number of residents (this always depends on its dimensions and amenities)
- the owner of the house (you or an real estate agent) is considered to be ‘apt and proper’, for example they have no list of criminal convictions or violations of landlord rules and regulations or code of application.
You also need to:
- send the council an updated gas security certification each year
- install and take care of the fire detector.
- give security certifications for all electrical devices when asked.
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HMO room dimensions
The new rules on HMO Properties in 2019 also incorporated new rules on minimum room dimensions.
Since October 1, 2018, any room in an HMO Property that is used as a sleeping are must be:
- At a minimum of 6.51 square metres if the individual sleeping in it is aged over 10
- At a minimum of 10.22 square metres if two individuals aged over 10 are sleeping in the same room
- At a minimum of 4.64 square metres for one individual aged under 10
- Any room with a floor area at a minimum of 4.64 square metres must not be used as a room to sleep.
How many bathrooms should an HMO Property have?
Landlords should provide one bathroom for every four residents who live inside the HMO property. Many HMO rooms come with suites and HMO property owners should always make sure that those living in their HMO property have functioning, appropriate bathing facilities.
HMO mortgages vary from typical buy-to-let mortgages in the way they let them have multiple rooms to multiple people, which conventional buy-to-let mortgages don’t authorize.
There are a plenty of HMO mortgages available, depending on which phase the HMO property is at, and these include:
- Expansion loans for build and construction
- Renovation loans
- Mortgages and re-mortgages for new and existing HMO Properties.
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