HMO properties are sometimes advertised as having irresistible gross yields of 100%+. Who wouldn't love a piece? The HMO sector has a high yield, but you need to be aware of your costs. This includes council tax, insurance costs, utility bills, management fees, rent arrears and any voids. In reality, an HMO can yield an ROI of 8-10% each year, compared to 4-5% for a single-tenancy purchase-to�let.
HMO mortgage lenders have additional requirements for the property. Some mortgage lenders have specific requirements about the property. For example, they may require that only one kitchen be available to tenants or that tenants share common seating. Others limit the number and height of bedrooms and storeys. Find a lender that will allow you to renovate your property before you lease it. A mortgage broker is able to assist you in navigating all the restrictions and conditions necessary to find a lender willing to lend.
Mortgages purchased to let are usually cheaper in terms rates and fees, and there are more lenders that offer them. Because the criteria are less stringent, they're also more accessible. Despite this, an HMO's potential additional income can often cover additional mortgage costs.
Before you decide to invest, make sure to speak with your local HMO licensing agent. It is important to be familiar with the local definitions and licensing requirements. This may include minimum sizes for living spaces and kitchens, number of bathrooms or showers, fire apparatus, and other such things.
Students and young professionals often rent HMOs. Renting a room in a property is less expensive than renting the entire thing. However, the average rent for all rooms is higher than what a family could pay. HMOs offer landlords a better opportunity to earn a higher rental yield.
HMO mortgages require large deposits. LTV ratios ranging from 60% to 75% (i.e. A minimum 25% deposit. Lenders will calculate potential rental income, but they will typically base their figures on the rental income you'd earn by renting the property out to one household. This means that the mortgage must be reasonable and affordable for you. A mortgage broker is able to tell you how large of an HMO mortgage your lender can afford.
Your HMO may not require a license. This could make it unsuitable for an HMO mortgage. Therefore, lenders may only offer you a mortgage to buy and let.