HMOs are a good investment. - You can expect to make roughly twice the rent if you have a higher rental income. A four-bedroom house rented to one family can be rented for PS800 per monthly, while four tenants pay PS400 each. To attract tenants, you might charge a rent plus all bills. Your costs will be much higher.
These potential benefits come with higher risks. It's more likely that you will have a higher turnover than traditional buy-to -let tenants. And every additional tenant is another unknown (e.g. They will pay the rent. Are they causing damage? They can cause legal disputes. You will also require a specialist mortgage.
A House in Multiple Occupation could be more profitable than traditional buy and let. With low interest rates landlords can maximise rental yields because of the high demand for rental properties in the UK. A mortgage that is right for you will ensure your rental income makes the most of your profits.
After you have gained some experience in letting property out, you might be ready to move on to renting out HMOs. A specialist HMO mortgage is required to convert an existing property into an HMO, or purchase a new one. If you have an existing property that is financed by an ordinary buy to let mortgage, you should contact your lender to discuss remortgaging the property to an HMO deal.
HMOs are often considered more risky than standard BTLs. HMO tenants can move faster because they aren't related and have a greater chance of voids. They are less committed to the property and can take less responsibility for its maintenance and care. Tenants are also more difficult to identify if there is damage or a problem.
HMO properties can generate higher yields than other types of property, but they are also more difficult to set-up. HMO licences may be required for landlords, depending on the nature and purpose of the HMO.
HMO licences can have additional conditions depending on the council. HMO licences may only be requested by local authorities. Without a license, the penalty for renting a licensable HMO is up to PS20,000.