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House of Multiple Occupation (HMO) properties have grown increasingly popular, especially among landlords seeking higher rental returns. But what exactly is a HMO, and how does it work? In this blog, I'll cover everything from the basics to design tips, standards, and how to turn a property into a profitable HMO.
What is a HMO property? How does a HMO work?
A HMO (House of Multiple Occupation) is a residential property rented out to multiple tenants who share communal spaces like kitchens, bathrooms, and living areas. Each tenant typically rents a single room, making HMOs a shared housing arrangement that appeals to students, young professionals, and others looking for affordable, flexible living options. HMOs are popular in high-demand rental markets as they allow landlords to earn rental income from multiple tenants in one property.
What types of HMOs are there?:
Shared House HMO: Multiple individuals live in a shared house or flat, with communal spaces for cooking, eating, and relaxation.
Bedsits HMO: Each tenant has their own room with basic facilities, like a small kitchen or bathroom, while sharing some facilities with others.
Student HMOs: Properties rented to students, often located close to universities or colleges, where each room is rented individually.
Do You Need a HMO license?
In the UK, many HMOs require a license. Licensing helps to ensure that HMO properties meet health, safety, and management standards to protect tenants.
When is a HMO License Required?
A property will generally need a HMO license if:
It is rented to five or more people who form more than one household.
There are shared amenities such as a kitchen, bathroom, or living space.
The property meets specific local council criteria for room sizes and safety.
Types of Licenses:
Mandatory License: Required for large HMOs with five or more tenants.
Additional License: Some councils require smaller HMOs to be licensed under additional licensing schemes.
Selective License: Some areas mandate licenses for all rental properties, including single-household lets.
Licenses are usually valid for five years and must be renewed. Failure to obtain a required license can lead to large fines and legal consequences.
HMO Design Ideas
Designing an HMO requires a thoughtful approach to balance tenant comfort, functionality, and the property’s appeal. Key design ideas for HMOs include:
Using every inch of space effectively. Built-in storage, multi-functional furniture, and open-plan layouts are useful for maximising space in communal areas.
Choosing materials that are easy to maintain and withstand frequent use, such as laminate or engineered wood flooring, and washable paint.
Where possible, consider ensuite bathrooms for added privacy, which can also increase rental appeal.
Including designate areas for socialising (living rooms, kitchens) and quieter spaces (bedrooms) to improve tenant comfort.
In high-traffic spaces like the kitchen, durable countertops, ample storage, and easy-to-clean surfaces are important.
HMO Standards and Requirements
HMOs must meet specific standards set by local authorities to ensure tenant safety and well-being. Common HMO standards include:
Each bedroom must meet minimum room sizes (usually around 6.51m² for one adult).
Installation of fire alarms, fire doors, and emergency lighting in compliance with regulations.
Ensuring there are sufficient bathroom, kitchen, and toilet facilities based on the number of tenants.
Obtain an Electrical Installation Condition Report (EICR) and annual gas safety checks.
Maintaining these standards is essential to keeping an HMO license valid and ensuring a safe living environment for tenants.
A Step-by-Step Guide to Converting a Property into a HMO
If you’re considering converting an existing property into a HMO, here’s a step-by-step guide to get you started:
Check with your local council for HMO licensing rules and regulations.
Some properties may require planning permission, especially if you’re planning structural changes.
If required, apply for a HMO license.
Ensure that all rooms, bathrooms, and communal areas are well-designed and meet HMO standards.
Use durable, easy-to-clean furniture and provide necessary appliances.
Fit fire doors, smoke alarms, and ensure compliance with electrical and gas safety standards.
Advertise the property on rental platforms and highlight the benefits of the HMO layout to attract tenants.
How does a HMO make money?
HMOs are highly profitable because they allow landlords to charge rent per room, resulting in a higher yield compared to single-family rentals. Here’s how they make money:
HMOs offer a higher yield. Renting rooms individually generally earns more income than renting the whole property as a single tenancy.
HMOs are an attractive option in expensive areas as they offer lower individual rents.
Many HMO tenants are long-term renters, which helps reduce vacancy rates.
Some landlords can include extra fees, by offering additional services, such as cleaning, utilities, and internet, for an extra monthly fee, adding more revenue.
Creating HMO Plans and Referrals
To successfully manage a HMO, landlords may benefit from developing HMO plans that detail each room’s layout, fire safety measures, and facilities. In addition, networking with local letting agents, HMO managers, and tenant referral programs can streamline the process of finding reliable tenants and keeping rooms occupied.
Detailed architectural or design plans are crucial when applying for HMO licenses and planning renovations.
Partnering with local agents and housing services can provide steady tenant referrals, reducing vacancies.
Tips for a Successful HMO
To maximise the profitability and success of a HMO property, consider these tips:
Invest in durable fixtures and high-quality furniture to reduce maintenance costs over time.
A well-presented property will instantly attract a greater interest.
Stay on top of repairs and upkeep to ensure tenant satisfaction and compliance with licensing standards.
Screen tenants carefully to maintain a harmonious household and avoid turnover.
Consider providing additional amenities like high-speed Wi-Fi, storage, or cleaning services, which can make your property more attractive.
HMOs offer a profitable, flexible way to invest in property by renting to multiple tenants and maximising rental income. By understanding the licensing requirements, following design best practices, and ensuring compliance with local standards, you can create a HMO that not only meets market demand but also provides a comfortable, appealing home for tenants.
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