A House in Multiple Occupation is a property that's let to more than three tenants. The tenants share some rooms but have their own bedrooms. The kitchen, bathroom, and lounge. Flat share or house share is an HMO.
Location is not a limitation for traditional rental properties. We work with letting agents across the country who have rented properties in nearly every possible location. They've all been rented, whether in the country, city or rural.
What is an HMO? A house in multiple occupancy (HMO) refers to a property that has shared facilities like bathrooms and kitchens. It is usually rented out to three or four people, but not as a "household". A licence is not required to operate a standard HMO that has four or fewer tenants. However, HMOs have different requirements than buy-to-let mortgages that are used for whole-property rentals.
Traditional buy to let would house a family of people or at most people who choose to live together. Disputes within the household can be resolved without needing to involve the landlord. The HMO type will typically be for students or working professionals.
HMO mortgage lenders are likely to take your rental income into account. This can help to increase your mortgage limit. HMO mortgages could be offered at tracker or variable rates. LTV rates generally start at 80% LTV. More attractive rates can be offered with higher deposits or lower LTV ratios.
HMOs will not all generate triple the rental income of a regular buy to let. It is also important to remember that utilities bills are typically paid out by landlords. The above example shows that even with a PS2k-3k monthly utility bill, rental profits are still substantial.
Only a handful of UK specialist lenders are willing to lend large HMO properties and are familiar with the lucrative yields associated with multiple tenants. They define HMOs differently and will lend against different properties. That is why it is important to have a broker help you to create your application and match the right broker. CMB, an experienced broker, can package your request to meet the lender with the best terms. This greatly speeds up the application process.