HMO (House in Multiple Occupation) ABC

What is an HMO

House in Multiple Occupation (HMO) refers to a property that is inhabited by more than one separate occupant. They are becoming more and more popular in the UK and in other countries around the world because of the opportunities they offer to their landlords. By renting out one property in separate portions to different tenants, a landlord can generate a decent income in rental yields monthly.

An HMO can be classified as shared accommodation either in a house or a flat. The minimum number of “unconnected” residents to be living in a house in order to call it an HMO is three. Moreover, there are three ways in which an HMO can be categorised; by tenant type, by configuration and by size. Students and single working professionals are the most likely groups to be found living in HMOs.

It does require a licence

As far as the licensing is concerned, an HMO has a specific license that needs to be acquired if the property is housing more than five tenants or if it’s three or more storeys high. The law regarding this license requirement is pretty strict. However in some cases the local authorities might extend licenses to HMOs that do not fall under this criterion given that they ask permission from the central government. 

A good overview of the rules on licensing is provided on GOV.UK.

All you need to know about HMOs as a landlord

There are many things that you need to consider before deciding to make your house or flat an HMO. Perhaps the biggest concern/obligation for any landlord is the provision of safety regulations. These include a gas safety certificate, and all other certificates for electrical appliances.

Landlords need to pay special attention to the tenants they allow to live in their homes. Proper procedures should be followed in order to get to know the tenant; where they work and where they lived before. In today’s world, it is very important to complete all documentation and procedures through a proper channel without taking anybody’s word for it. Complete a thorough background check of each tenant by contacting their previous landlord and asking them for a reference. This will help ensure the safety of your property and you reputation as a landlord in the neighbourhood and prevent any unfortunate incident in the future.

It should also be noted that an HMO landlord has equally pressing obligations and responsibilities towards its tenants. There need to be annual gas and electricity safety check, repairs of wear and tear of the property annually, the prevention of overcrowding in the property and other obligations that fall onto the shoulders of a regular landlord. Along with other things, these are obligations that a landlord must fulfil, on legal and moral grounds. In exchange for the rent that the tenant is paying a landlord, the least they can do is make sure that the tenant’s living conditions are safe and comfortable.

Managing an HMO

As far as the management of an HMO is concerned, it is an understatement to say that the more tenants you let into your property, the tougher the management of the HMO can be. The time that will be needed to manage the paperwork, the documentation, the rental yields and also the wear and tear can increase proportionally. While they might scare off some landlords from letting out their property at all, they can be easily turned into positives with just a little planning and effort.

If you let out your property to a larger number of tenants, the rental yields you will generate will obviously be higher. This can enable a landlord to hire a letting agent that will effectively manage your property and carry out all the procedures without you having to worry about anything. This can greatly lessen your trouble regarding the needs and responsibilities of your tenants with the use of just a little bit of the profits that you are earning from the rent.

Final word

If you’re looking to invest in an HMO, it is important for you to pay attention to each and every consideration in order to ensure that you make an informed decision. Look online through the various advantages and disadvantages of letting your house out as an HMO to make sure that you enable yourself to make the best out of the opportunity.

Rentila provides you with the service of keeping track of every expense that is incurred through the process of converting your property into an HMO. Crucial deadlines relating to the licensing, the conversion and other documents can be taken care of with Rentila. Visit our website for the latest news and updates on all the real estate happenings as well our services that are available to ensure that you make the correct investment decision.

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