If you’re thinking of investing in a HMO (house of multiple occupation) for the first time, you might already know that they’re a different type of rental to traditional single lets. They can be very profitable in terms of rental income, but you do need to work a bit harder to reap the rewards.
Here are five key questions to ask and things to know that should help you prepare for being an HMO landlord:
They certainly can be. If your main investment goal is getting as much rental income and profit as possible, then you should give HMOs some serious consideration. Letting to multiple tenants on a per-room basis can give you two to three times the rental income you’d get if you let the same property to a single household.
However, there are a few things you need to understand:
Mortgage providers consider having multiple, unrelated tenants in a property to be a higher risk investment than letting to one household, so you’ll need a specialist HMO mortgage (and insurance). These have different lending criteria and usually higher interest rates than ‘traditional’ buy-to-let mortgages, so it’s worth taking advice from a buy-to-let specialist broker, especially as rates are rising at the moment. For a free initial consultation to discuss your plans, just contact the team at our sister company, Mortgage Scout.
Again, because of the higher risk associated with having multiple, unrelated tenants living in your property, there’s much more legislation associated with HMOs, especially around health and safety. Here are just a few of them:
If you’re letting on a per-room basis to individuals who will all be moving in and out at different times, their rent should also cover all bills: council tax, electricity, gas, water, WiFi, TV licence, etc.
You’ve got to decide on how much is fair, so that you’re properly compensated for your tenants’ usage and they’re not overpaying – which is particularly important in the current energy crisis. Fitting a smart meter should help you keep track of how much energy they’re using – but bear in mind that it’s better to have your property fully let at a slightly lower rate than have rooms sitting empty.
The best way to make a success of any property investment is to work with buy-to-let experts that know the market in your local area. For HMOs, it’s particularly important to take advice from an agent, like us, that’s used to dealing with multi-lets and can advise you on what to buy, legal requirements, and property and tenant management. We also focus on increasing rents on an annual basis, to ensure our landlords are getting the best profit from their investments.
For more information and advice, just get in touch with your local office.
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