Should you Convert your Property into an HMO?
Should you convert your property into an HMO?
Naturally, every landlord will have pondered whether to convert their property into a Home with Multiple Occupations (HMO). Why?Because everyone knows that HMOs are more suitable for tenants' lifestyles and make profitable investments with high-earning monthly rental income. Across England alone, HMOs are worth a combined £26bn.
Yet, the latest figures depict a 2.4 annual decline in HMOs, meaning that in just two years, the HMO market in England has shrunk by over 21,000 properties.
At Hybr, we work with HMO properties and see the pros and cons they offer landlords and tenants. Our blog answers landlords frequently asked questions and shares the benefits of converting your property to an HMO.
Answering your questions about HMOs
What is a HMO property?
Any housing owned by a private landlord and shared by several individuals is called HMO, House with Multiple Occupations. Read our blog on what HMO stands for and the difference between an HMO and non-HMO property.
Do I need a HMO license?
Not all HMOs need a license, but in some cases, you do. As a landlord, you require a license for your HMO when you have rented out your property to a group of at least three individuals (not members of a single family). Learn what an HMO license is in our blog and understand your responsibilities as a landlord.
What responsibilities do you have as an HMO landlord?
To be compliant with HMO renting regulations, landlords must do the following:
- Complete an annual assessment for gas safety
- Ensure a five-year assessment for electrical safety
- Install smoke and carbon monoxide alarms and maintain them for fire safety
- Ensure there are enough rubbish and recycling bins
- Provide enough facilities for cooking, cleaning, and washing for the number of tenants living there
- Be responsible for the maintenance and repair of the communal areas
How do I find tenants for HMO properties?
We help landlords find great tenants to rent their homes and promise to help fill rooms fast. We advertise your property on Rightmove for free and give you direct access to reliable student tenants. And we send you a personalised bio so you know who will live on your property.
Find out how working with Hybr makes finding tenants stress-free.
Is a student house considered an HMO?
If a student house is made up of at least three individuals who form more than one household and share communal areas such as bathrooms, living room and kitchen, then yes, it is an HMO.
Are HMOs hard to manage?
Landlords can fear HMOs as they see the extra tenants as extra work, and that’s where we come in. We remove the hassle by offering flexible packages that suit your needs as a landlord. At Hybr, we can help landlords manage the relationship with student tenants throughout the year.
Benefits of converting your property to HMO
You’re in constant demand
The number of renters looking for rooms is much higher than the rooms available. SpareRoom reported that 245,351 renters were searching, and only 34,085 rooms were available.
Think about the thousands of students who move to new cities each year to start university and seek rental accommodation. By converting your property to HMO, you are opening the door to the student rental market that gives you a guaranteed yearly influx of new tenants.
Another attractive benefit of HMO properties is their robust demand across trends in the housing industry. For example, yes, house sharing is popular with the younger generation, but there has also been a significant increase in 45 to 64-year-olds looking for house shares.
You’re maximising your high yields
When you let your property to multiple tenants, one of the HMO benefits is earning three times higher rental yields than renting out to one household. Having a room-by-room rental system, rather than the standard single-let property, maximises the rental space, and more tenants mean more secured rental income.
For example, if you owned a 5-bed property in Bristol, the rental income for renting out to a standard family would be approximately £3,000 per month. But if you rented out each room for the rental price of £850, your monthly income would go up to £4,250.
You’re lowering your upfront investment
One of the forgotten benefits of converting to HMO is that your up-front investment fees are less, and you get better value for your money than standard buy-to-let.
For example, say you’re preparing your four-bedroom HMO property, and you’re buying the household essentials such as a washing machine, boiler, fridge etc.; you’ll be collecting four people’s rent. Compare that to if you had four different properties with one bedroom each. You’d need to buy four washing machines, boilers, fridges, etc., for each property, yet you’d still only be collecting four people’s rent.
Now consider the scenario of the boiler breaking or the washing machine needing replacing. Isn’t it better to just have one to fix rather than four?
You’re less at risk of rent arrears
When converting to HMOs, you are collecting rent from individual tenants. Each tenant is responsible for paying their rent, reducing the risk of rent arrears. If one tenant in your HMO property falls behind with rental payments, you will still receive the income of the other tenants.
You won’t struggle to find tenants
The student rental market in the UK is huge and gives HMO landlords a steady influx of tenants each year. At Hybr, we find vetted, supported, and great tenants for HMO properties in a matter of days. We support your student tenants throughout their rental journey, taking the onus off you and making renting effortless. Start by listing your property for free here.