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What to know before managing an HMO 

Article Posted - 12th April 2019

 

Houses in multiple occupation (HMOs), also called multi-lets, have proved lucrative for some landlords, but despite the potentially impressive yields, other considerations such as additional regulations, licensing schemes and extra administrative work mean that HMOs aren't for everyone. With the recent launch of the NLA's HMO course selling out in it's first week, we take an in-depth look at HMOs and who should invest in them.

What is an HMO? 

At its basic level, an HMO is a property which houses three or more people in two or more households, who share some basic facilities e.g. kitchen or bathroom. There are slightly different definitions if there is an owner-occupier living in the property. You can find full details in our Online Library

Why would I want to be an HMO landlord? 

The benefits of being an HMO landlord are considerable, and include high demand, a lower risk of void periods and higher yields.  

The benefits of HMOs: 

What do I need to know before I take on an HMO? 

HMOs incur greater start-up and management costs, and the capital growth of your property may suffer.   

The risks of HMOs: 

Caution: in October 2018 the Government extended the scope of mandatory HMO licensing in England. Previously it only applied to properties of at least three storeys with five people from two or more households. But now it covers all properties that house five or more people from two or more households, whatever the building size. It is estimated that the new rules will bring 177,000 new properties into mandatory licensing, affecting thousands of landlords. The three storey requirement remains in Wales. 

What are my next steps? 

  1. Talk to an expert. There are many things to consider before investing in HMOs, and only experts will be able to help you decide whether it's right for you. NLA members can call the NLA Telephone Advice Line on 020 7840 8939, and non-members can see their options for joining here.  

  2. Talk to your local housing officer. Before you make any investment it's critical to know the planning regulations and licensing requirements of the area in which you plan to invest. Not all local authorities follow the same rules, an it's important to check as requirements change from borough to borough. 

  3. Once you've talked to the right people, take time to do your own research as well. Read widely on HMOs and licensing. A good place to start would be the NLA's Online Library (free to members), which offers a wealth of knowledge and case studies, or to attend the NLA's one-day HMO course

  4. Recruit tenants well. Understand the personalities and lifestyles of your tenants and try to attract other tenants with similar ideals to maintain harmony within the home. The fewer inter-tenant disputes there are, the longer tenants will stay. 

  5. Keep up the maintenance of the property in order to keep tenants happy and avoid any bigger issues down the line. Consider employing a regular cleaner and gardener to maintain the general cleanliness of the property and the outside space 

  6. Get adequate and specialised insurance. HMO insurance differs from that of single property insurance in that it supports landlords who let their property to three or more unrelated occupants who share communal facilities such as the kitchen and bathroom. You need to ensure you are fully protected with a comprehensive HMO insurance policy should the worst happen. NLA Property Insurance say that “Whilst some insurers are averse to protecting HMO properties due to greater perceived risks, we recognise that some of these risks are really no greater than they would be for a single occupancy property. We also appreciate that not all HMOs are the same and as a result we have tailored our rates dependent on how the facilities are shared to fully support your specific HMO insurance requirements.” 

*English Housing Survey: Private Rented Sector Report 2016/17 

** NLA Quarterly Landlord Survey Q4 2018

 

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