When looking for buy-to-let properties for sale, it’s likely you’ll be focusing on the tenants you’d like to attract. HMO properties are often appealing prospects – as they offer a way to maximise rental returns, without any significant further investment.
If this is your first time investing in property in the UK, you might have a few questions about HMOs and how they work. Here’s a quick guide to help you.
Property Investment Opportunities – Understanding HMOs
What is an HMO?
HMO stands for House of Multiple Occupancy. The actual definition of an HMO is somewhat ambiguous. However, most people agree with The Housing Act 2004 definition, which asserts that an HMO is ‘a house which is occupied by three or more unrelated persons who do not form a single household’.
In simple terms, this means, if you’re renting a property to three tenants or more, who aren’t related to one another, and they share bathrooms and a kitchen – then you’re renting an HMO.
Why is it advantageous to rent out an HMO property?
Increased rental yield is the main benefit of letting out an HMO. By increasing the number of tenants you can accommodate within the property, you’re effectively boosting the number of people paying rent each month. HMO properties are also often very popular with students, which can improve your chances of securing tenants.
What are the key differences to renting out a normal property?
When renting an HMO, it’s likely you’ll have to obtain a licence from the local council. However, this isn’t always the case, and it’s worth checking before you invest. It’s also important to note that if your property contains three or more storeys, and is occupied by five or more people, it will require additional licencing. Be aware, local councils are legally allowed to add additional licensing to areas at their discretion. They’re also able to insist on licences on properties that have not been well maintained.
Are there any other legalities to be aware of?
You’ll need to manage your property in accordance with The Management of Houses in Multiple Occupation Regulations 2006, to ensure that the house is kept to a good standard. You’re also required to provide safe, secure accommodation for your tenants. All appliances and equipment should be kept in good condition, and you should adhere to fire and other safety standards.
What are the risks?
The risks of letting an HMO are similar to any form of property letting. However, do note that failure to manage your property to the required standards is regarded as a criminal offence. This can incur a penalty fine of as much as £20,000 if you’re licenced, and £5,000 if you’re not.
Buy-to-Let Property for Sale – Finding an HMO
Generally speaking, the best place to find a suitable HMO property is with a professional property investment agent. Specialist agents will often have properties on their books that aren’t currently available on the general market, which makes it a lot easier to secure a great return on investment.
However, buying a house at auction can also offer the chance to get a bargain, so it’s worthwhile keeping an eye on upcoming properties at your local auction house.
The Buy2Let Shop
If you’d like to learn more about letting an HMO property, or want to develop your property portfolio, get in touch with The Buy2Let Shop team today. We’re property investment agents in London, and we’ll help you to find the right property for your needs. We also offer help with buying a house at auction, and hold regular property seminars in London, designed to extend your knowledge of the market.