Investing in HMOs? The Pros and Cons

Investing in HMOs? The Pros and Cons

Investing in a House of Multiple Occupation (HMO) in Crewe or Stoke-on-Trent has many benefits

• Higher rental yields

• Constant cash flow as you have a multiple number of tenants rather than just one

• End valuations can be calculated on a commercial basis 

• Faster ability to build income than with a buy to let portfolio

However, HMOs can also have their drawbacks

• Higher running costs as you, the landlord, will usually pay for utility bills and council tax

• More frequent changes with tenants

• Higher maintenance needs due to the number of people living in the property

• More complexity about rules and regulations - especially around licensing. 

The requirements and rules are more complicated than the ones for standard buy-to-let, so it is essential to understand your responsibilities as an HMO landlord. Using an experienced and knowledgeable letting agent like Best Nest is vital to ensure you remain compliant. The complexities around licensing and requirements can be onerous if you are managing the HMO yourself. For example, you may need to apply for an HMO licence, and there are additional requirements around fire safety. 

What Is An HMO?

A property is classed as an HMO if at least three tenants live there, forming more than one household and the toilet, bathroom or kitchen facilities are shared.

A household is defined as either a single person or members of the same family, including people who are married or living together.

HMO Licensing

Following the Housing Act 2004, local authority licensing was introduced for some HMOs in England and Wales. This is known as a mandatory HMO Licence. You will need to obtain a mandatory licence if your property houses five or more people from two or more households

HMO Rules And Requirements

If you are already a landlord of buy-to-let properties, all of the landlord responsibilities you are familiar with still apply. You will also have additional requirements on top of these as an HMO landlord.

What next?

At Best Nest our team has expertise in HMOs and is able to help guide and advise you if you’re thinking about investing in HMOs in Crewe or Stoke-on-Trent. Book a call with our director, Wendy Whittaker-Large to discover how you can benefit from investing in HMOs in Crewe and Stoke-on-Trent.