HMOs are an excellent investment. - Higher rental income. As a rule, you could expect to earn roughly twice as much rent. One example is a four-bedroom house that's let to a family for PS800 per months, and four other tenants paying PS400 each. In order to attract tenants you may charge rent including bills, which will make your costs much higher.
There are only a few UK lenders that are willing and able to lend money on large HMO properties. They also understand the risk associated with multiple tenants, which can lead to lower yields. They can set their own HMO definitions and lend against what they want. This is why you need to hire a broker to assist with your application. CMB, a seasoned broker, can package and tailor your application to the lender that will offer you the best terms. This dramatically speeds up application processing.
An HMO will not be valued by every lender based on rental income. Instead, the lender will consider the HMO to be a standard home. This could limit the amount that you can borrow, which is counterproductive to the purpose of an HMO mortgage.
Multilets are similar to HMOs in that they can be rented to tenants who are not related and share common facilities within the property. However, their main difference is that they are unlicensed.
Lenders might accept evidence that you have applied for an HMO license in place of the actual licence. This is because it can take longer and may not always be practical. You may be considered 'fit and proper to operate an HMO if you have the licence. However, it is a good idea to have the license readily available in order to facilitate the application stage underwriting.
My HMO can target which type of tenants? - Low-cost/affordable housing / housing benefits tenants: Some landlords choose to sell their entire properties to the local authorities to be used as low-cost housing. This allows them to earn a steady income while also getting a discount. - Working professionals are increasingly renting their homes into their 30s and 40s. They seek out higher-spec properties with more bathrooms, but they also want stable tenants who live a more peaceful life. -
HMO licences can have additional conditions depending on the council. HMO licences may only be requested by local authorities. Without a license, the penalty for renting a licensable HMO is up to PS20,000.