As a landlord, you want to maximise the rent you receive from any property you let out.
A House of Multiple Occupancy (HMO) exists for precisely this reason.
These properties are found all over the UK. Read on to find out more about them.
What is a house of multiple occupancy?
In the United Kingdom, a House of Multiple Occupancy (HMO) is a single property with multiple tenants that share certain areas.
Shared areas in HMOs tend to be:
- Hallways
- Kitchens
- Bathrooms
- Toilets
- Living areas.
In most cases, HMO buildings were initially designed for one family and later adjusted to accommodate separate tenants.
From the landlord’s financial standpoint, this adjustment means price per person decreases, but the total income increases.
Where are HMOs usually found?
HMOs are often found in areas with a high population density (and therefore limited space).
The central areas of London, Birmingham and Manchester are prime examples.
You’ll also often see many HMOs in university towns, where students live together to save on costs.
What are the tenants’ rights in a HMO?
Every tenant has rights that must be respected in the United Kingdom. And a HMO is no different.
General rules
Once the HMO has four or more people living there, the landlord must ensure that:
- It isn’t overcrowded
- There are enough cooking and washing facilities
- All shared areas are in good condition
- Fire safety is in place
- All electrics are checked
- Everyone has enough rubbish bins.
Size requirements
Your tenants’ right to have these things is written in law. There are also sizing requirements for these properties that all rooms must adhere to.
It varies based on the number of people in the house and their age. These sizes are:
- One person over 10 years: 6.51 square meters
- Two people over 10 years: 10.22 square meters
- One child under 10 years: 4.64 square meters.
Tenants’ recourse
If tenants feel that the conditions in the HMO they live in are insufficient, they should contact the local council.
If the council finds tenants’ rights are not being met, the landlord can be forced to bring the property up to scratch.
How to convert into a HMO?
Planning permission
You need planning permission to convert a ‘regular’ property into a HMO. Your council will ask for details on:
- The number of people you’re planning to house
- The size of the rooms
- Any renovations you’ll make.
If everything is in order, you’ll get a certificate confirming your right to convert the house in this way.
Safety checks
The next thing you need to do is focus on safety, including:
- Smoke alarms
- Burglar alarms
- Carbon monoxide detectors.
Each one should be professionally installed with a corresponding certificate.
Amenities
HMOs must have adequate amenities for tenants.
So, appliances must work. There should be sufficient washing and cooking facilities for everyone. And there must be enough rubbish bins.
Insurance
You should get insurance to cover unexpected loss of rental income or the cost of alternative accommodations.
With all the approval and documentation in place, it’s time to furnish your property and look for your tenants!
Advantages of a HMO for the landlord
Increases rental income
A significant advantage of a HMO is that it increases the rental income for the landlord.
You can often have two or three families living in the property, which creates more income than just one family.
Diversifies income
For a landlord, a HMO is useful because it ensures they still have income, even if one family moves out. This diversifies their income source.
Easy to sell
The demand for HMOs is relatively high in certain parts of the United Kingdom.
For example, you’ll find many HMOs in university towns. Students live together to save money.
So, you can also sell this building at a higher price when the time arrives.
Disadvantages of a HMO for the landlord
Upfront costs
There’s a large up-front cost to creating a HMO. You’ll need to bring in professionals to install the relevant safety measures.
And you often must modify the property’s structure in some way, such as adding fire doors or an extra bathroom.
Time for conversion
Converting a property into a HMO is time-consuming. Applications and inspections with the council can take a long time.
Difficult to find tenants
It’s challenging to find tenants to fill every room in your house. And you can’t proceed without adhering to all regulations.
Tenant turnover is also usually higher in HMOs, which is an extra expense.
Maintenance
Maintenance of a HMO is more challenging too. Disputes between tenants may occur and damage your house.
Wear and tear costs tend to be higher, and you’ll need to conduct regular inspections and repairs.
Should I invest in a HMO as a landlord?
Most figures show that HMOs have higher average rental yields than typical buy-to-let properties.
If your goal is to increase your income long-term, then it’s worth considering. But there are challenges to face.
You’ll need to accept the up-front cost involved with this project. This could involve all of the following:
- Spending money on renovation
- Getting safety measures installed
- Meeting local council regulations
- Hiring a property manager.
If you’ve got experience as a landlord, the challenge might seem less daunting.
But if you’ve never let out a house, it could be better to start with something simpler.
Your location makes a big difference, too. In university towns or major cities, finding enough tenants is easier. But in rural locations, it’s more difficult.