However, this does give unlicensed HMOs a negative connotation. It suggests that they are illegal or "fly-by-night". These smaller HMOs are often referred to by local authorities, lenders, and owners as multi-lets, "HMOS not Required To Be Licensed", or "nonlicensable MMOs".
HMO buy and let4 bedroom semidetached property with 2 reception rooms1 room converted into a bedroomRent to 5 single-working professionalsMonthly tenant rental income = PS400Monthly landlord income = PS2000Annual rental earnings = PS24,000. You can see why HMO landlords are increasingly interested in HMO properties. It is possible to see a significant difference in gross rental revenue.
HMOs: What are the benefits? - Less "impactful voids": A gap between tenants at a single occupancy house can be as little as one month. This allows you to make repairs, redecorate, and view the property, without any rent coming in. The rent received from other tenants can be reduced with an HMO. Your costs could be more tax-deductible than a standard BTL.
For an HMO mortgage, you will need to have a substantial deposit. LTV ratios of 60 to 75% are the norm for lenders. At least 25% deposit. Although potential rental income will be taken into consideration by lenders during stress test calculations they will often base their sums more on the rental revenue you would earn from letting the property to one household than individual households. This means that your mortgage must be easily affordable, with substantial margins. A mortgage broker can tell you how big of an HMO loan you can afford, according to the lender.
Mortgages to buy-to-let are often less expensive in terms of fees and rates. There are also more lenders offering them. Because the criteria isn't as stringent, they are easier to get. An HMO will often make additional profit on top of the mortgage.
Lenders can accept evidence of a HMO license application in lieu the actual licence. This can take more time and it is not always practical. Accordingly, you could be deemed "fit and proper" to run an HMO under the condition of having the license. However, it is best to have your licence available so that the underwriting process can be expedited at the application stage.
HMOs are an investment opportunity. HMOs offer fewer "impactful empty spaces": The gap between tenants of a single-occupancy property can be no more than one month. This allows for repairs and redecorating as well as viewings. Rent does not come in. You can reduce your losses by having an HMO where the rent is paid by the remaining tenants. A higher percentage of your expenses may be exempted from tax than a standard BTL.