An HMO, or house in multiple occupation, is a property that has been rented to three or more tenants who are not part of the same household or family. A lot of landlords have HMOs because they are considered a more effective way of running a rental portfolio. This is often related to being able to collect rent from a higher number of tenants, but the location of the property can also drive this decision.
There are some renters who choose to live in an HMO because the rental payments will generally be cheaper. They may also prefer to live with more people. House-shares are common among younger renters and students which makes HMOs a viable option for a lot of potential landlords.
If you are thinking of converting your property into an HMO, there are some steps that you need to work through first. This will include meeting the legal requirements to ensure that the property is habitable for multiple people. It’s advisable to consult property marketing services about these considerations.
Before You Start
It is important to note that the majority of HMOs need to have an HMO license. If you are going to rent your property to five or more renters from more than one family you will need a license. A license is also needed when your property is at least three storeys high and has shared bathroom or kitchen facilities.
If some of these criteria fit, but not all of them, you will still need to apply for a license. If you are unsure, you should contact your local authority. Your HMO license will be valid for five years and you need to have a separate license for each HMO property that you have.
To comply with the license, you need to ensure that the property has a valid gas safety certificate which you’ll send to the council once a year. Smoke alarms will also need to be installed and you will need a safety certificate for all the electrical appliances. These will need to be available on request.
Depending on the property and the work that needs to be done to convert it, you might have to get planning permission. When carrying out any of these activities, you should keep a record of all correspondence, applications and approvals. This ensures that you are covered in the future should any issues arise.
Converting a Property
When you convert your property, you need to first think about what your tenants are going to need and how much space they require. You should also consider the level of furniture and appliances that you are going to provide in the property.
In the five years after converting your property, it will be visited by the council who will carry out a Housing Health and Safety Rating System risk assessment. If there are any risks which are deemed unacceptable found during this visit, you will have to address them.
When converting, it is likely that you will need to change the use of some rooms. A spare room could be converted into another bathroom or a reception room can be made into an additional bedroom. You might also need to move walls in order to alter the room sizes, which is something that needs to be carefully planned before you do anything. It is advisable to talk with a professional when working on some of the more complicated parts of the conversion.
There are some landlords who will convert a garage into additional space. This will require planning permission so you need to contact your local authority. Converting your reception rooms may be essential, but is not always the right decision. In the best situation, the property will have 2 reception rooms and one can be converted while the other is left as a living area. Tenants will often be put off by a property that does not have any reception space so you need to consider this carefully.
What Else You Need to Consider
One of the primary differences between a standard rental and an HMO is the fact that you will generally have a higher turnover of renters. This is why you should look at setting aside at least two months’ worth of rent every year to cover any potential void periods.