HMOs are rented by young professionals and students who are unable to rent whole properties or aren't yet settled enough to live with a partner. It is more affordable to rent a single room than an entire house, but the rents for the whole property are usually higher than the rents that could be charged to a single family. The HMO allows landlords to make a greater rental income.
HMOs can be considered higher-risk than standard BTLs. HMO tenants move around more quickly than standard BTL tenants, and there is a greater risk of voids. They can be less committed as tenants to their property as their home. This could mean that they are less responsible for its care and maintenance. Additionally, it can be difficult to identify any issues or damage with a specific tenant.
HMO mortgage rates are generally higher than those for standard buy-to-let mortgage products. HMO mortgage rates are higher because there is less competition in the market for HMO mortgages. HMO lenders will be more willing to lend money, but they will charge higher rates and fees. However, an HMO's income should be sufficient to pay for a mortgage, maintenance, and utility bills.
Because HMOs are complex, most buy-to-let lenders won't lend to landlords who have not been experienced. Although criteria can vary from lender-to- lender, a minimum of one to two years' experience as a landlord is usually sufficient. Although some lenders will allow first-time landlords to be approved, they will often require you to hire a property agent to manage your property. Our buy to let team can help you determine if you are eligible for an HMO mortgage.
HMOs are an investment opportunity. HMOs offer fewer "impactful empty spaces": The gap between tenants of a single-occupancy property can be no more than one month. This allows for repairs and redecorating as well as viewings. Rent does not come in. You can reduce your losses by having an HMO where the rent is paid by the remaining tenants. A higher percentage of your expenses may be exempted from tax than a standard BTL.
When assessing the worth of your HMO, lenders may consider the rental income. This is especially advantageous if you intend to withdraw equity from the property.
When assessing the property's value, lenders may take into account the rental income. This is especially beneficial if you have converted the property or are looking to withdraw equity.