What is a HMO?
A HMO, or House in Multiple Occupation, is a property that is rented out to three or more unrelated people who share common facilities such as a kitchen and bathroom. HMOs are becoming increasingly popular in England, as they offer landlords a number of potential benefits, such as higher rental yields and increased diversification.
Pros of running a HMO
Higher rental yields: HMOs typically generate higher rental yields than traditional buy-to-let properties, as landlords can charge rent per room rather than per household. This is because HMOs are often in high demand from tenants, such as students, young professionals, and immigrants.
Increased diversification: HMOs can also help landlords to diversify their property portfolios. By investing in a variety of different properties, landlords can reduce their risk exposure and maximize their returns.
Potential tax benefits: There may be some potential tax benefits associated with running a HMO. For example, landlords may be able to claim certain expenses against their rental income, such as the cost of maintenance and repairs.
Cons of running a HMO
Increased management workload: Running a HMO can be more time-consuming and labor-intensive than managing a traditional buy-to-let property. This is because landlords need to deal with multiple tenants, each with their own needs and requirements.
Higher risk of void periods: There is a higher risk of void periods with HMOs, as tenants can move in and out more frequently than tenants in traditional buy-to-let properties. This can lead to a loss of rental income for landlords.
More complex licensing requirements: In some parts of England, landlords need to obtain a license to operate an HMO. This process can be complex and time-consuming.
Conclusion
Running a HMO can be a rewarding investment for buy-to-let landlords. However, it is important to weigh up the pros and cons carefully before making a decision. Landlords should also make sure that they understand the licensing requirements in their area.
If you are interested in HMO management for a hassle free investment service, please book a no obligations consultation call to see if your property fits our criteria.
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