House in Multiple Occupation (HMO) properties are generally house shares. They are used by students and bachelors living together to save on rent. You must be perplexed about what exactly HMO management involves and what residential letting is. Fret not; this blog will tell you everything about the HMO management service and its pros and cons.
So, read on to know about houses in Multiple Occupation wherein 3 or more people rent the same house and share certain facilities. A landlord does residential letting and allows 3 different households to rent rooms in their property in an HMO. Read ahead to dive into the nitty-gritty of HMO.
HMO Meaning
HMO literally translates to House in multiple occupations. It essentially means that 3 or more people that are not of the same household rent rooms in the house and share the bathroom and kitchens.
It is essentially a single property rented by 3 or more people. It can prove to be a spectacular investment for landlords. For renters, it can prove easy on the pocket and gives you a place to stay in.
For clarity’s sake, an HMO involves the following:
- 3 or more tenants
- Different households
- Shared facilities
An HMO is when 3 friends, 2 couples or 1 couple and a single unrelated person rent a property from a landlord into residential letting. Generally, room size for an HMO should be at least 6.51 square meters for a single person and 10.22 square meters for 2 people.
An HMO includes the following:
- Hostels
- Several bedsits in large buildings
- Converted flats
- Self-contained cluster flats
Do You Need A License for HMO?
Generally, for an HMO with only 3 tenants, you don’t require a license. However, if you are going to have more than 5 tenants, you need to have an HMO license.
HMO license in the UK costs approximately £600, and it varies from authority to authority. Further, depending on the size of your HMO, you might require planning permission to do residential letting and develop your property for an HMO.
If you obtain an HMO license, you need to ensure you renew it every 5 years if you want to continue letting your property. Plus, you need to ensure you meet the HMO compliance meticulously to ensure the safety of the property and of your tenants.
Benefits of HMO
HMOs have several benefits for renters and landlords. Let’s explore the benefits of HMOs.
Higher Yields For Landlords
Since more than 3 tenants rent the same property, the landlord can stand to get a higher yield in terms of rent compared to traditional buy-to-let properties. Plus, such properties will help the landlord streamline their portfolio due to the higher yield they can receive.
Lower Void Periods For Landlords
HMOs means that at any given point, at least some rooms are occupied by a tenant. So, even if one tenant decides to stop renting, the landlord will still receive income from the other tenants until they find one more tenant.
So, at no point are you left without a tenant and a steady stream of income.
Division Of Rent For Renters
For renters, the rent amount of renting the whole House is divided on a room-by-room basis. It can prove easy on the pocket for renters as they won’t be paying rent for the entire House but merely for the room and shared facilities.
High Demand
HMOs are high in demand as they are economical, and several tenants seek affordable accommodations.
Cons Of HMO
While HMOs offer several benefits, there are some cons too.
Tighter Legislations
HMOs have tighter legislation. You need to have a license for a large HMO, and you might need a planning commission. Plus, as a landlord, you need to ensure you meet the room size requirements and other HMO compliance.
Higher Up-Front Costs
There is a higher upfront cost to convert your property to an HMO. You need to furnish your property thoroughly and ensure all the facilities are in working condition. So, as a landlord, you will have a higher upfront cost when converting your property to an HMO.
Endnotes
HMO properties are beneficial to landlords looking to increase their portfolio investments. It provides higher yields. Plus, it divides the overall rent for people choosing to rent an HMO. Further, if you are a small HMO, you won’t need any licensing.
You’ll notice that while HMOs provide several benefits to renters, it has several cons for landlords. It requires more expenditure to prepare an HMO, and it might be challenging to get tenants at times due to the shared facilities norm.
Fret not; you can avail of the HMO management service of a company like New Age Lettings who will care for the property for you. Plus, they will manage the tenants for you.