A House of Multiple Occupation (HMO) is any property with shared facilities such as bathrooms and kitchens which is rented out to three or more people who aren’t part of a single “household” (usually a family).
As a landlord, you don’t need a license to run a standard HMO with four or fewer occupants. But with all HMOs, there are different mortgage requirements compared with buy-to-let mortgages for whole-property tenancies.
However, what many people call an HMO is typically a large shared house, a rental property with five or more tenants, where the tenants share toilet, bathroom or kitchen facilities. There may also be a defined number of stories in the building.
Top tips for HMO landlords
Higher rental income: as a rule of thumb, you might expect to net roughly double the rent. For example, a four-bedroom house let to one family for £800 per month, compared with four individual tenants paying £400 a month each.
However, you may be charging rent, including bills, to attract tenants, and your costs will be considerably higher.
Fewer impactful voids: the gap between tenants on a single occupancy property can be at least a month, allowing for repairs, redecorating and viewings, with no rent coming in. With an HMO, the rent from the remaining tenants reduces your losses. And more of your costs may be tax-deductible than with a standard BTL.
Who are prospective HMO tenants?
With the cost of buying a home still rising beyond the reach of young buyers, the demand for affordable rented accommodation remains very strong.
Houses of Multiple Occupation (HMO) Mortgages
This type of mortgage is taken out on properties typically occupied by five or more people. HMO mortgages are prevalent among landlords who own student accommodation.
Not every lender will offer HMO deals, as these types of products can be challenging.
Because of this, we recommend that you contact us as a specialist Mortgage Advisor in Bristol that focuses on student accommodation.
Official government figures reveal that there were 5,356 student-only houses and flats across the city at the end of 2020.
It means one in every 38 properties in Bristol is now a student home. This is one of the highest concentrations of student-only homes in the UK.
Between September 2020 and September 2021, average rents in Bristol grew by £141. Bristol’s average £1,243 is £345 higher than the £898 average rent in England.
Bristol is the second most expensive unitary authority based on average rent price.
Bristol’s average rent growth rate between September 2020 and September 2021 was 12.8%. If rents continue to grow at this rate, average rents will reach £2,012 by 2025.
The average cost of rent in Bristol varies depending on the property type.
Prices start at £535 for a single room and rise to £2,519 for a house with four or more bedrooms.
Where to advertise properties to rent: Gumtree, Rightmove, and Zoopla are the top three platforms for HMO owners in Bristol.
A room in an HMO in Bristol could cost between £400 to £700, not including bills.
Studios in commercial properties in Bristol can be up to £1000 per month, although this usually includes bills and internet.