The Ultimate Guide to HMO- What do You Need to Know?

The Ultimate Guide to HMO- What do You Need to Know?

A HMO, by definition, is a property that has at least 3 tenants who live there. People will need to share a bathroom or kitchen facilities with each other as well. A property is not a HMO if you have two individuals who live and share facilities, regardless of whether or not the landlord lives there. If the landlord lives in the property with two tenants, then the tenants are classed as lodgers, and the property is not a HMO. Normally, a HMO is a house that is split into various bedsits. It can also be classed as being a bed-and-breakfast hotel if certain requirements are met.

Advantages of HMO

There are numerous advantages of a HMO. One of them is cash flow. Rental yields tend to be way higher for a HMO when compared to a standard, single let. In fact, they can be up to three times higher. The demand for single-room lets are now in huge demand as well, so you won’t have many problems filling spaces. If one tenant falls into arrears, you can still collect rent from the other people who live there as well.

Disadvantages of HMO

There are some disadvantages to a HMO as well. Some of them include the fact that you have a higher tenant turnover and that you also have a higher risk of damages.  The running costs tend to be higher, and collecting rent from more than one individual can result in way more admin work. There are also more regulations that you need to comply with, particularly when it comes to safety. Check out this guide to find out more about that.

Your Responsibilities

You’ll be responsible for maintaining the fixtures, white goods and fittings. You’ll also be responsible for maintaining the communal areas or repairing furnishings. Licensing is also important. You have to make sure that you get a HMO license if you require one. This isn’t always the case, so it helps to look into that before you go ahead with your decision to buy this type of property. You may also need to renew your license every 5 years, but this can vary depending on the borough you are with. Your local authority should be able to give you a good amount of information regarding the license you need. Generally, this will cost you around £100 a year.

It should be noted that a license can only ever be granted. A lot of councils will carry out inspections to ensure that your property is suitable for HMO. If your property is not up to standard, you will be required to make the proper improvements before you are given your license. It may be that you need to have the wiring and appliances checked every five years, that you have the appropriate fire measures in place, and that you also do annual gas checks. Ensuring that the property is not overcrowded and that any communal areas are in good condition is also important.

Failure to acquire a license is a criminal act. If you do not comply, you will be faced with a hefty penalty, and it may even mean that your clients have to vacate the premises, so you need to really ensure that you seek the appropriate licensing.

The Growth of HMO

HMOs have grown a lot over the years. More and more lenders are now giving people the funding they need for this kind of property as well, so if you’re an investor, it’s an avenue worth exploring.


We have specialist lenders that offer HMO Mortgages, for more information, contact us on 0800 001 6515.