HMOs are more risky than regular BTLs. HMO tenants tend to move more quickly because they are not related, which increases the chance of voids and unpaid rents. They may be less committed to the property, which can lead them to take less responsibility for its upkeep and care. It can be harder to spot any damage or problems with a tenant.
Why invest in HMOs HMOs (Houses in Multiple Occupation) are often more profitable than standard rental properties. But, what exactly is this and how easy can you finance them. A House of Multiple Occupation (HMO), is a property that has three or more occupants sharing a bathroom or kitchen facility. They are also unrelated. Properties require an HMO licence from the local authority in order to meet regulatory standards. This is often called a house-share. It's a popular option for young professionals and students, as rent is generally more affordable than a small studio or flat. A HMO can also be a benefit to landlords and property investors, since multiple bedsits often yield higher rental returns than a stand-alone purchase to let.
HMO Valuations. Lender methods may differ in this area. Some lenders use the traditional surveyor inspection in combination with comparing it to other properties in the region. If there aren�t any HMOs, the valuation will reflect the property�s value as if it were a single house. However, this method doesn�t account for HMOs that have multiple rental incomes. Therefore, it limits your borrowing options.
HMO Valuations- Lender methods can vary when it comes to valuations. Some lenders combine traditional surveyor inspection with comparing it with like-for-like properties in the same region. If there are no HMOs within the area, then the valuation is based upon the amount achieved as if it was a single household. The method doesn't take into account the extra income HMOs typically attract through multiple rental incomes. This can limit the amount you are able to borrow.
HMO mortgages take the same amount for lenders to process as any other buy-to-let mortgage. Each case is different. Pre-pandemic it would take three to four months to receive a purchase offer, and another four to six weeks to complete.
After gaining some experience with letting properties, you might be ready for letting out HMOs. Either you convert an existing property to an HMO (or buy a brand new one), but in either case, you will need an HMO mortgage. You will need to contact your lender again if you are already a homeowner with an ordinary mortgage to buy a property.
HMO Values - The methods used by lenders to value properties can vary. Lenders can use traditional surveyor inspections, and compare it to similar properties in the area. If there is no HMO in the area then the valuation will take into account the value achieved as though it were a single family. However, this doesn't account of the extra income HMOs usually attract by having multiple rental earnings, which can limit your ability to borrow.