Houses in Multiple Occupation, or HMOs, are generally defined as properties with a minimum of three unconnected tenants sharing kitchen, bathroom and toilet facilities. Unconnected means not part of the same household, therefore unrelated.

Depending on the type of HMO and its location, licensing may be required from your local authority, rooms may be subject to minimum size guidelines or additional fire safety measures put in place.

  • Mandatory licensing – applies to a property with 5 or more tenants forming 2 or more households. This applies to the whole of England.
  • Additional licensing – applies to a property with 3 or more tenants forming 2 or more households. This is usually introduced by a Local Authority over specific wards or areas only, although in some cases it can be applied to a whole administrative area.
  • Selective licensing – applies to all privately rented properties. Again, this is usually introduced by a Local Authority over specific wards or areas only, particularly if there have been issues with anti-social behaviour.

The term can refer to hostels, bedsits and refuges for vulnerable adults, but most commonly are perceived as poor quality accommodation for numerous tenants on low incomes, such as student housing.

Residents living near HMOs often complain about higher levels of noise, overflowing bins and parking requirements of multiple tenants. But occupants of HMOs also complain about substandard living conditions, unkempt communal areas and unresponsive landlords.

More recently, a new breed of HMOs has emerged as the demand for affordable, yet high quality, shared housing increases. This type has become especially popular with young professionals saving for a place of their own, as data suggests they are able to save considerably more than renting alone.

Investing in HMOs

As an investment, HMOs are easier to manage than several single-occupancy buy-to-let properties and provide landlords with the opportunity to maximise rental income from multiple rooms, while minimising the impact of voids and non-payment.

If you’re considering investing in HMOs, then it is important to commit yourself to producing high quality, fully compliant accommodation that attracts professional tenants who enjoy living in your properties.

You’ll need to think about:

  • Location – Most importantly, you’ll need to find out what legislation your local authority has in place for HMOs. It is also crucial to invest in a location that your ideal tenants would want to live in. Access to good transport links and local amenities will probably be important to them.
  • Type of property – If you’re not buying an existing HMO, you will need to look for properties that have the potential to be cost-effectively converted and accommodate the right amount of rooms and bathrooms at the right size. There are different advantages to being on the smaller and larger ends of the HMO scale, you can read about them here. Having local planning knowledge prior to a purchase is also essential, so do your research.
  • Management – You should decide whether you would like to manage your HMO(s) yourself or employ an agent to do so. If it’s the former, you need to think about what kind of landlord you want to be, how much time you have and whether it is enough to effectively manage the property(ies). This can be the difference between you having loyal, long-term tenants and unhappy ones.

However, HMOs are very complex buy-to-let models and there are many risks involved. Without the right guidance and knowledge, you could easily purchase the wrong property for the wrong price, attract undesirable tenants and face fines if the right licensing isn’t in place. There is also limited advice available for inexperienced HMO investors.

If you’d like to know more about how we at Platinum Property Partners can help you to build your own portfolio of profitable HMO properties, please get in touch.

Interested in investing in property? Find out the 7 Steps to Successful HMO investment here.