HMOs are often furnished completely. This is an additional expense to consider. Traditional buy to lease properties are typically unfurnished.
HMO mortgage rates are typically higher than the standard buy-to let mortgage products. HMO mortgage markets are less competitive due to fewer lenders. HMO mortgage lenders may charge slightly more for loans and higher rates than those that would be willing to lend. The income from an HMO should not be less than what is needed to cover a mortgage and utilities bills, as well as maintenance.
An HMO mortgage lender will often take rental income into account. This can significantly increase the mortgage amount. HMO mortgages are available on tracker and variable rates. LTV rates typically start at 80% LTV. Higher deposits and lower LTV ratios offer more attractive rates.
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 properties can generate higher yields than other types of property, but they are also more difficult to set-up. HMO licences may be required for landlords, depending on the nature and purpose of the HMO.
A House in Multiple Occupation could be more profitable than traditional buy and let. With low interest rates landlords can maximise rental yields because of the high demand for rental properties in the UK. A mortgage that is right for you will ensure your rental income makes the most of your profits.
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.