You want to make a long-term investment that will yield a high return. To do this, you need to negotiate the best terms possible on your finance. For more information, contact our HMO Mortgage financing specialists.
HMOs will require a license from your local council for five years. It's important that you inquire about the policy in your area with the relevant local authority. The general rule applies to properties with at least five occupants. However, licences may be required for smaller properties with fewer tenants. You will be in the best position to apply for it, as the requirements vary depending on where you are located.
HMO mortgages can only be obtained by experienced landlords. Some lenders won't accept applications from landlords who have been in the business for at least two years and have had experience in HMO letting. These may be additional requirements for lenders. If you are a first-time landlord, it will be difficult to get an HMO mortgage approval. You will likely need to let a single family's property.
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.
It can be difficult to find the right HMO financing for you. Each lender has different criteria. Our experienced buy-to-let team can help you find the best HMO mortgage or provide general advice on property finance.
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.
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.