Please Note: This Article is 6 years old. This increases the likelihood that some or all of it's content is now outdated.

The term ‘Houses in Multiple Occupation’ basically refers to a home that is rented out to a number of tenants that ‘do not form a single household.’ This can take many and varied forms, but one thing is common to all of them: they’re by no means a simple investment.

Thanks to selective licensing and an increased appetite of local authorities to prosecute, it’s becoming ever more challenging for new landlords to enter the market. Coupled with the typically volatile nature of the HMO tenant-base, which generally includes students, transient and foreign workers and LHA claimants – HMO Landlords have their work cut out.

Compared with a typical single occupancy buy to let property, rental yields for an HMO are generally higher. So is becoming a HMO a worthwhile investment, and what does it take to be successful in this game?

The basics

- Advertisement -

Unlike a single occupancy rental property, if you’re going to run a HMO, it’s likely you will need a licence. But it’s not quite as straightforward as that. Whether or not you do depends on three things:

  • The type of property
  • How it is occupied
  • Your council’s specific rules

Different local authorities operate in varied ways, so if in doubt, always approach your local authority before you take any tenants.

In addition, regardless of which local authority you operate in, you will need to adhere to strict housing laws and Management Regulations. The latter are special health and safety regulations that apply to all HMOs – whether a licence is required or not – and breach of these can incur a maximum fine of £5,000.

Landlord law expert and regular LandlordZONE contributor, Tessa Shepperson, frequently writes about the legal challenges facing HMO Landlords. She recommends that landlords be extremely vigilant when it comes to abiding by the law at all times, saying, “landlords running HMO properties are strongly advised to get some training so they are aware of what their obligations are.”

But as any UK landlord will undoubtedly testify, there’s much more to property investment than mere red tape. Quite apart from the legalities facing HMO investors, there is a wealth of secondary considerations to take into account before deciding to take on a property.

The realities of becoming a HMO Landlord

The daily realities of running a HMO property can stack up, and as the HMO Landlady points out, “The reason most people shy away from this market is that they fear the complexities and time consuming management… it takes a lot of hard work, and a lot of people skills.”

Her own experiences as a HMO investor show that the skills involved go quite far beyond those required in running a typical single occupancy rental. When so many varied people come to live under one roof, the job of the landlord doesn’t end at property management and maintenance but can easily extend into the art of actually shaping a household.

Amongst the many facets of her job, one of the most affecting as detailed by the HMO Landlady is the need to empathise and react accordingly to tenants’ needs.

Speaking of her own experiences, she details drug raids, threatened suicides, tenants with serious mental health problems and threatened court action amongst other things, but says, “When people are near rock bottom they’re desperate and panic so I don’t take it personally. Having said that, I took a mediation course which helped enormously.”

Clearly, owning and running a HMO comes with its own unique challenges. However, according to the HMO Landlady, when done properly, as a job and investment, it can also be extremely rewarding.  As well as the emotional rewards reaped from building a household for tenants that may not have so many alternative options, there are also typically higher yields to be made from this kind of property.

Getting a mortgage

If you do decide to take on a HMO property as an investment, then it’s likely a mortgage will be required.

Getting a mortgage for a HMO property can be straightforward, provided you seek the right counsel before putting pen to paper. A representative from Aldermore Bank says, “One of the most common mistakes made by beginner HMO landlords is making the assumption that a normal Buy-to-Let mortgage will suffice. In fact, this may be considered fraud if it breaches the mortgage terms and conditions and it’s revealed that you had no intention of letting the property as a single let when you purchased it.

To avoid trouble, always make sure that you run through your exact plans for your property with a mortgages expert, who will be able to point you in the direction of a valid HMO agreement.”

Over to you

Whichever way you look at it, becoming a HMO landlord is a potentially life-changing commitment and one that no investor should go into lightly. It’s for that reason that Aldermore Bank has created a beginner’s guide to Houses in Multiple Occupation (HMO) featuring real-life examples from top industry experts, including the HMO Landlady, the ‘HMO Daddy’ Jim Haliburton, and LandlordZONE guest writer and landlord law aficionado, Tessa Shepperson. Click here to download the guide.

Please Note: This Article is 6 years old. This increases the likelihood that some or all of it's content is now outdated.
Subscribe to LandlordZONE

LEAVE A REPLY

Please enter your comment!
Please enter your name here