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.
What kind of tenants can my HMO target with? - Low cost housing, affordable housing or housing benefit tenants: Sometimes landlords will let their whole properties to the local authorities. They get a discount, but still earn an income. - Working professionals - An increasing number of renters are in their late 20s or 30s. They are seeking higher-spec properties, often with more bathrooms, and less party-life-style tenants. -
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.
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.
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".
After you have gained some experience in letting property out, you might be ready to move on to renting out HMOs. A specialist HMO mortgage is required to convert an existing property into an HMO, or purchase a new one. If you have an existing property that is financed by an ordinary buy to let mortgage, you should contact your lender to discuss remortgaging the property to an HMO deal.
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.