If you’re looking for ways to boost your buy-to-let profits, converting your rental home to a House in Multiple Occupation (HMO for short) could be the answer.
HMOs have exploded in popularity as an option for landlords to increase their income by letting out a property as individual rooms, rather than as a single home.
For instance, a four-bedroom, two-living-room family house with two working parents and three children could become a six-room HMO with six income-earning adults.
When asked by The Times, brokerage Mortgages for Business put average yields for HMOs at 7.5%. That’s a 50% leap from the 5% average of renting to a single family.
However, complex regulations and extra management mean HMOs aren’t for every landlord or property. With that in mind, we’ve put together some balanced guidance, including:
So, if you’re wondering whether the world of HMOs is right for you, you’re in just the right place to find out!
A House in Multiple Occupation is defined as any residential property let to three or more adults who rent their rooms individually and share toilet, bathroom or kitchen facilities.
Finally, each tenant should have their own tenancy agreement covering their room and shared areas, with a deposit taken and protected in the same way as a single let.
With rents going up and up, tenants are adjusting their expectations around what they’ll get for their money, which opens up new options and advantages for landlords, including:
We also find that many HMO landlords operate through a limited company, so they can deduct 100% of the mortgage interest from the profits before paying tax - a considerable saving!
The law for HMOs can feel inconsistent between national and local authority policies, but here are some of the main regulations you’ll encounter.
Given the rules for an HMO in the Wilton & Salisbury area may differ from those elsewhere, it’s a wise move to check the relevant council’s website before you invest in buying or converting a property.
There are plenty of positives to owning an HMO, but there are some downsides to bear in mind as well. They may not be dealbreakers for you, but it’s better to keep surprises to a minimum.
Finally, although it’s not a legal requirement, you’ll be expected to provide furniture, all of which must comply with health & safety regulations and have the fire safety labels intact.
As you might imagine, there’s more to running an HMO than a single tenancy. As well as shorter average stays and extra admin, there are some additional costs to consider.
On the upside, as room rents have risen and the number of HMOs has increased, more letting agents now manage them, giving you more choice in who you trust your property to.
If you’re thinking of converting a rental property to an HMO in the Wilton & Salisbury area and you’re wondering how suitable or profitable it could be, why not get in touch?
Call us on 01722 580059 or email us at email@example.com to speak with one of our team - we’re here to make your life as a landlord as enjoyable and successful as possible.
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