Houses in multiple occupations, better known as HMOs are houses rented by at least three different household tenants (three different families). Increasingly, landlords are renting out their properties as HMOs as they consider this set up as a more efficient way of running their rental portfolio. For starters, they are able to collect rent from multiple tenants. The location, as well as the type of property in question, can also favour having HMOs over other types of leases.
For tenants, the can benefit from cheaper monthly payments that some HMOs offer. Other tenants who also prefer living with more people get the opportunity to do so in HMOs. In other cases, house-shares are the best options for younger renters and students. However the market for HMOs and as people rent longer, more landlords view them as viable options.
If you are a landlord and you are considering converting your property to an HMO, you need to take several steps for your endeavour to be successful. There are many HMO rules you need to follow. Chief among the things you have to overcome include meeting the legal requirements in as far as making your property conducive habitat for people.
Before You Start
You might need an HMO licence. If you will be letting to 5 or more different tenants from more than one household, your property is at least 3 storey high and the tenants share some amenities such as the bathroom, toilet, and kitchen, you have to get a licence.
It is important to note that you have to get a licence, even only some of the criteria apply to your case. Moreover, it is prudent for property owners to check with their local council about the licensing requirements. In most cases, the HMO licence last for 5 years. You also need to obtain a licence for each HMO you are running.
Aside from the initial licence, you will also need to have a valid gas safety certificate every year. Moreover, it should be sent to your council every year as well. Furthermore, you need to install smoke alarms. You should also ensure that you have safety certificates for electrical appliances for inspection when requested.
Beyond that, you might also need to obtain planning permission should you need to make major extensive changes to the property during the conversion step. And when carrying out such conversion, make sure you record and store applications, correspondence, and approvals for future reference.
How Practical is Converting a Property?
The first thing to do is to consider how much space your tenants are going to need. Thereafter, you need to consider the variety of furniture and appliances to provide your tenants with.
Another thing to have in mind is that within 5 years of converting your property to an HMO, your local council will visit it and conduct Safety Rating System and Housing Health risk assessments. Should unacceptable risk be noted, you will have to address them.
During the conversion process, it highly likely you will have to convert some rooms to other purposes and uses. For instance, you might convert the spare rooms to a bathroom or convert the reception to additional bedrooms. During the conversion process, you might have to move rooms to create the desired rooms.
These are the things you have to plan very carefully. Importantly, you want to hire experienced professionals to handle the technical bits of the project. Where you need planning permissions, you should obtain the permissions. For instance, converting the garage to a spare room requires one to have planning permissions.
While converting reception space for additional rooms is common, it is not always the right decision. However, should you have 2 reception rooms, you can convert one of them and leave the other to be the living space and dining area. Keep in mind tenants typically shy away from HMOs with no reception space or living room.
Other Considerations to Have in Mind
Unlike traditional rental properties, having HMO might come with a higher turnover. It is advisable, therefore, to put aside at least 2 months’ rent every year to cover the period you have empty space.
While converting your rental property to an HMO might be an effective way of running your portfolio, you need more planning, and it comes with more upkeep work.