For an HMO mortgage, you will need to have a substantial deposit. LTV ratios of 60 to 75% are the norm for lenders. At least 25% deposit. Although potential rental income will be taken into consideration by lenders during stress test calculations they will often base their sums more on the rental revenue you would earn from letting the property to one household than individual households. This means that your mortgage must be easily affordable, with substantial margins. A mortgage broker can tell you how big of an HMO loan you can afford, according to the lender.
The HMO will generally yield a greater return on investment than letting out a home to a tenant. You can charge by the room and so charge more. This will require a specialist loan.
HMOs: Why should you invest? - A higher rental income: As a rule of thumb, you can expect to net approximately twice the rent. Four-bedroom houses can be let out to one family at PS800 each month. This compares with four separate tenants who pay PS400 per month. You may charge rent inclusive of all bills to attract tenants. However, your costs could be significantly higher.
This gives the term "unlicensed MMOs" a pejorative connotation, implying that they are either illegal or flying blind. Some local authorities, lenders and owners refer to these smaller HMOs in the following ways: multi-lets; "HMOS Not Required to Be Licensed" or "non-licensableHMOs".
HMOs are a good investment. HMOs have fewer "impactful vacants". The difference between tenants in a single occupancy home can be less than a month. This allows for viewings, repairs and redecorating while no rent is coming in. Your losses are reduced by an HMO, which allows the tenants to pay rent. Tax-deductible costs are possible to a greater extent than standard BTL.
As the price of a home is rising, young buyers still have a strong desire for affordable rented accommodation. Look at local listing websites (Gumtree. Zoopla. Rightmove ) to determine the strength and demand from prospective tenants.
HMOs don't always produce three times the rental income from a typical buy to let. Utility bills are typically paid by landlords. As you can see, even with a PS2k-3k per year utility bill there is still a lot of rental income.