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How To Convert A Property Into An HMO?

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In the past five years, landlords have had to grapple with a variety of new regulations and financial setbacks. From Section 24 to the 3% Stamp Duty surcharge, landlords are exploring various methods to make the most out of their portfolios.

One of the options gaining traction is the conversion of rental units into Houses in Multiple Occupation (HMO).

If you too are considering this strategy, there are a few essential steps you need to take. Not only are there legal requirements to meet, but you also need to make the property more livable for your tenants.

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What Is An HMO?

HMOs are an incredibly popular option for tenants today due to their cost-saving benefits. The bills associated with HMO housing tend to be much lower than other types of properties since utilities are usually shared, such as council tax, water rates, and heating.

Some HMOs may even include broadband access in the monthly rent, and some offer additional services like weekly cleaning and increased security.

Landlords also benefit from HMO properties as they offer higher yields than standard rental rates. This is especially true in areas with high rental prices and a large student population, as there is a strong demand for HMOs.

Additionally, there is far less exposure to issues like rent arrears since each tenant has a separate private tenancy agreement and is responsible for their rent.

Even if one tenant defaults, the landlord can collect rent from the other tenants and make the necessary mortgage payments.

Deciding To Convert A Property

If you’re deciding to diversify your portfolio by investing in an HMO, the process may not be as complex as you think.

Whether you’re converting an existing property or buying a new one, creating an HMO house is easy. If you don’t own a property yet, do your research and use your connections in the industry to find the perfect investment for your needs.

If you’re converting an existing property or buying one specifically for that purpose, there are a few steps you need to take. First, determine whether the property needs to be licensed.

Most local authorities require a license for any property with five or more occupants from more than two households. Check with your local authority to find out if you need a license and how to avoid one if you don’t.

Ensure the property meets HMO standards. The landlord must have a valid gas safety certificate from the local authority each year, have the relevant smoke alarms and carbon monoxide detectors installed, and have safety certificates for any electrical appliance on request.

There are also additional requirements, such as a minimum room size of 6.51 square metres and a maximum number of people per room specified in the license.

All gas appliances must be maintained and a gas safety check must be done each year, and the electrical installations must be safe to use. Fire doors, emergency lighting, and pest treatment must also be provided. Finally, there must be locks in each bedroom.

If the property doesn’t meet the necessary guidelines, make the necessary changes before applying for a license. You may need planning permission to convert the property, so check with your local planning authority.

Depending on your ideal tenant, consider what selling points you can add to your plans. For students, provide communal study spaces, laundry facilities, and a large kitchen.

For young professionals, provide broadband, garden spaces, and en suite bathrooms. For working professionals, consider well-furnished common areas, amenities, and parking.

When it comes to financing, HMO mortgages are some of the hardest to get. Generally, the minimum property value is between £75,000 and £100,000, and you must demonstrate a few years of experience as a landlord.

Additionally, the rent must cover more than just the interest payments on the loan. Get HMO insurance as well, and chat with an agent to determine what type of coverage you need.

How To Convert A Property Into An HMO
Whether you're converting an existing property or buying a new one, creating an HMO house is easy.

Creating the Right HMO Can Be a Great Investment!

An HMO property is a great way to diversify your investments and generate a reliable source of property-related income. Depending on the location, obtaining a landlord’s license for an HMO may be a strict requirement.

Despite this, investing in an HMO can be a great option in many markets. It’s much more than a bedsit – it’s a comprehensive property that can be used by tenants of all ages, and it could be the perfect way to meet your investment goals. To learn more, speak to HMO owners and conduct thorough research.

Ask yourself “What is an HMO property and how can it benefit me as an investor?” You’re likely to get many different answers that will help you decide whether it’s the right choice.

HMOs are worth considering if you’re thinking about investing in property shortly. It’s an option that you should research and evaluate to ensure it fits your needs.

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