HMOs: Why would you want to invest in them? - Higher rental income. You might expect to get roughly double the rent. You can rent a four-bedroom house to one family for PS800 a month. Four tenants would pay PS400 a monthly each. Rent inclusive of bills may be a way to attract tenants. This will increase your costs.
Only a few UK specialists are available to lend on large HMOs and understand the potential for high yields given the higher risk of multiple tenants. They have their own definitions and criteria for HMOs and the types of properties they will lend against. This is why a broker is needed to help you put together your application and match you with the right broker. CMB is an experienced broker that can package your application to match the lender's terms. This significantly speeds up the process.
HMOs may be more difficult than traditional buy-to let models. HMOs have facilities that are shared between tenants. Tenants may sometimes become disenfranchised. Sometimes, tenants may not see eye to eye and you could be called upon as a mediator.
HMOs have complex requirements, so most buy to rent lenders will only consider experienced landlords. The criteria for lenders will vary, but usually one to two years of landlord experience is sufficient. Some lenders will not accept landlords who are new to the area. However, this is usually accompanied by a requirement that the property be managed and managed by an agent. If you're unsure if your property qualifies for an HMO mortgage, the buy to let team can help.
HMO properties may be available for sale that offer irresistible "100%+ Gross Yields". One would not want to miss out on that opportunity. Be aware of the gross yields in HMO sectors: Your costs include insurance, council tax and utility bills. You also have to pay rent arrears or voids. A HMO could have a ROI of between 8-10% and 4-5% per year for single-tenancy buys-to-let.
Students and young professionals often rent HMOs. Renting a room in a property is less expensive than renting the entire thing. However, the average rent for all rooms is higher than what a family could pay. HMOs offer landlords a better opportunity to earn a higher rental yield.
HMO mortgages are offered by 27 lenders to individuals and 23 to limited companies at the time of writing. HMO mortgage rates are more expensive than buy-to-let mortgages because they are a specialty property type. The increase in competition has made rates more affordable for landlords. They start at 1.64% for individuals and 2.69% for limited companies.