The potential for houses in multiple occupation (HMO), to be more profitable than regular buy and let investments, is a reason why. HMO mortgages have been increasing in popularity. However, do landlords really need them? Will a traditional buy and let mortgage suffice?
Students: You can have your rent guaranteed (often by your parents) and usually have an automatic limit to the length their tenancy.
There are also some void periods. HMOs can have longer void times than traditional buy-to let. HMOs could also mean higher maintenance costs for landlords than traditional buy and let models. This could be because HMOs share common areas such as living rooms, kitchens, and bathrooms.
After you have gained experience in the letting of property, you may be ready for HMOs. An HMO mortgage specialist will be required to help you buy or convert an HMO property. If you currently own a property in a normal buy-to-let mortgage you will need remortgaging to an HMO.
HMO mortgages require large deposits. LTV ratios ranging from 60% to 75% (i.e. A minimum 25% deposit. Lenders will calculate potential rental income, but they will typically base their figures on the rental income you'd earn by renting the property out to one household. This means that the mortgage must be reasonable and affordable for you. A mortgage broker is able to tell you how large of an HMO mortgage your lender can afford.
Lenders might take into consideration the potential rental income when assessing your HMO's worth. This is especially important if the property has been converted and you want to withdraw some equity.
The HMO will generally yield a greater return on investment than letting out a home to a tenant. You can charge by the room and so charge more. This will require a specialist loan.