HMOs don't always produce three times the rental income from a typical buy to let. Utility bills are typically paid by landlords. As you can see, even with a PS2k-3k per year utility bill there is still a lot of rental income.
Why Should You Invest in HMOs HMOs, or Houses in Multiple Occupation, are generally more profitable than standard rental properties. What are they? And how easy is it for you to finance them. A House of Multiple Occupation, also known as HMO, is defined as a property with three or more occupants who share the bathroom or kitchen facilities. For properties to be able to operate legally, they must obtain a HMO licence from their local authority. These homes are often referred to as a "house-share" and are very popular among young professionals and students. The rent is usually cheaper than a studio or small apartment. Landlords and property investors also have the benefit of an HMO. Rents from multiple bedsits generally yield higher rental yields that a stand-alone home.
HMO mortgages are offered by 27 lenders to individuals and 23 to limited companies at the time of writing. HMO mortgage rates are more expensive than buy-to-let mortgages because they are a specialty property type. The increase in competition has made rates more affordable for landlords. They start at 1.64% for individuals and 2.69% for limited companies.
HMO buy to Let4 bedroom semi-detached home with 2 reception rooms1 converted bedroomRent to 5 single working professionalsMonthly rent income per tenant = PS400Monthly Rental Income = PS2000Annual Rental Income = PS24,000. It's easy to see why HMO properties are being sought after by more landlords. The difference in gross rental income is quite remarkable.
The landlord can manage an HMO property through a single agreement or a separate contract for each tenant.
HMOs are usually restricted to certain places. HMOs may be targeted at students, single professionals, or other tenants. HMOs often have restricted locations. They are usually located in the city centre or close to major amenities and bus routes. It would not be a good idea to set up an HMO in rural areas in the middle and end of nowhere.
Mortgages purchased to let are usually cheaper in terms rates and fees, and there are more lenders that offer them. Because the criteria are less stringent, they're also more accessible. Despite this, an HMO's potential additional income can often cover additional mortgage costs.