How much does it cost to obtain a HMO license? Costs associated with getting an HMO license will vary by location. Some councils charge based upon the number of bedrooms within a property. Others will charge a fixed fee that can range from a few hundred pounds up to more than a thousand. Lenders will know how long it takes to issue a license and may accept proof of application during mortgage underwriting. This is despite the fact that it is important to be prepared for this stage.
What returns can an HMO give me?
HMO properties might be offered for sale with irresistible "100%+ gross returns". It's hard to imagine anyone not wanting a piece of this. Gross yields in HMOs are not good. There are significant costs involved, such as council tax, insurance and utility bills. Management costs include rent arrears, voids, and management costs. You might see a ROI of 8-10% for an HMO, as opposed to 4-5% for a single-tenancy Buy-to-Let.
HMO houses can be more lucrative than regular buy-to-let investments. HMO mortgages are becoming more popular among landlords. But do you really need one? Or can a traditional buy-to-let mortgage suffice?
What kind of tenants can my HMO target with? - Low cost housing, affordable housing or housing benefit tenants: Sometimes landlords will let their whole properties to the local authorities. They get a discount, but still earn an income. - Working professionals - An increasing number of renters are in their late 20s or 30s. They are seeking higher-spec properties, often with more bathrooms, and less party-life-style tenants. -
HMOs are considered to be more at-risk than standard BTLs. HMO tenants have a tendency to move quickly and are often unrelated, which can increase the likelihood of voids or unpaid rentals. They might be less committed and take on less responsibility for the property's care and maintenance. A tenant may be more difficult to spot if the property is damaged or has problems.
HMO licenses issued by local authorities are valid for five consecutive years if approved. HMO licences must be provided for each property. A landlord might have three HMO properties. Each HMO will require a license.