What is an HMO?
A House in Multiple Occupation HMO is:
An entire house or flat that has been let out to three or more tenants who form two or more households and who share a kitchen, bathroom or toilet.
A house that has been converted into bed sits or other non-self-contained accommodation and that has been let out to three or more tenants who form two or more households and share a kitchen, bathroom or toilet.
A converted house containing one or more flats which are not wholly self-contained and which is occupied by 3 or more tenants who form two or more households.
You will NEED a HMO licence if your property
- 1. has three storeys or more (including usable basements or attics), and
- 2. is occupied by five or more people, and
- 3. those people form two or more households, and
- 4. the tenants share the kitchen, bathroom or toilet
So where do we source these HMO’s, and how do we find them?
Well, we don’t actually source ready made HMO’s. I have personally bought properties that have been already converted and already tenanted, but unfortunately they are usually poorly managed, or poorly converted. HMO’s are also difficult to mortgage and only commercial lenders will consider them.
We source normal family homes, in need of refurbishment in town centre locations, near universities, hospitals and where there is a high demand for shared accommodation.
We look for properties with 3 or 4 bedrooms and 2 reception rooms arranged over 2 levels. This allows us to convert 1 reception room to an additional bedroom. The ideal HMO has 4 or 5 letting bedrooms, this maximised income, without requiring to register with HMO licensing.
Buying normal family homes, allows clients to utilise regular buy to let mortgages or a residential mortgage, without going down the avenue of commercial lending.
Although we can usually structure a low money down deal on these properties, the cost of renovation and conversion usually costs around £10,000 for a 4 bedroom HMO and £12,000 for a 5 bedroom HMO.
HMO investment is suitable for investors who wish to achieve higher rental yields, across fewer properties.
A very good income can be made from only 10 of these properties.