HMOs are often furnished completely. This is an additional expense to consider. Traditional buy to lease properties are typically unfurnished.
HMO Values - The methods used by lenders to value properties can vary. Lenders can use traditional surveyor inspections, and compare it to similar properties in the area. If there is no HMO in the area then the valuation will take into account the value achieved as though it were a single family. However, this doesn't account of the extra income HMOs usually attract by having multiple rental earnings, which can limit your ability to borrow.
Students and young professionals often rent HMOs. Renting a room in a property is less expensive than renting the entire thing. However, the average rent for all rooms is higher than what a family could pay. HMOs offer landlords a better opportunity to earn a higher rental yield.
There are also some void periods. HMOs can have longer void times than traditional buy-to let. HMOs could also mean higher maintenance costs for landlords than traditional buy and let models. This could be because HMOs share common areas such as living rooms, kitchens, and bathrooms.
These higher potential rewards have higher risks. Tenants are more likely to leave than in a traditional buyÐto-let. Additionally, every tenant you add is an unknown risk (e.g. Will they pay the rent? Will they cause harm? Will they cause any disputes? You will also need a specialist loan.
HMO mortgages will be required for rents to more then three tenants. The reason is that your property wonÕt be eligible for a regular Buy to Let mortgage. They are only intended for single-household tenants. If you were to apply for a regular mortgage to an HMO property, it would be a violation of the mortgage terms. Lenders could take legal action.
HMO licences may be issued by local councils. These licenses are valid for five-years if they are approved. HMO licences will be issued to each property, and not to each landlord. In other words, a landlord will need a license for each HMO property if each HMO requires one.