Traditional buy-to-let models would usually house a family, or people who have decided to live together. Disputes can usually be resolved within the household, without the landlord being involved. Therefore, landlords will usually have an HMO type such as student buy-to-let or one that is only for working professionals.
Traditional buy-to-let properties are typically suitable for one or more people. A single rental payment from the household would be due on a weekly, or monthly basis. The utility bills would be paid by the household. These are often referred to simply as "single-lets".
HMOs can be rented by students or young professionals who cannot afford to rent the entire property. They may also not be settled enough to move in together. A tenant can rent one room for less than an entire property. However, the total rent for all of the rooms is typically higher than what could be charged to a single household. HMOs can bring in a higher rental income for landlords.
HMO properties have higher yields, but are more complicated to set up. HMO licenses are required depending on the nature of HMO properties.
There are also void times to be aware. HMOs tend to have longer void periods than traditional buy to rent. HMOs are more expensive than traditional buy-to let models and landlords might have to pay higher maintenance bills. This can be due to the use of communal areas such bathrooms, kitchens, living rooms and other common spaces (where available).
HMO buy and let4 bedroom semidetached property with 2 reception rooms1 room converted into a bedroomRent to 5 single-working professionalsMonthly tenant rental income = PS400Monthly landlord income = PS2000Annual rental earnings = PS24,000. You can see why HMO landlords are increasingly interested in HMO properties. It is possible to see a significant difference in gross rental revenue.
Lenders may accept evidence to support an HMO licence application in lieu of the actual license. However, this is more time-consuming and not always feasible. On the condition that you have the license, you might be deemed 'fit to run an HMO'. But, if possible, the underwriting process will be facilitated if the license is readily available.