What is a House of Multiple Occupancy (HMO), and do I need a licence?

By in Resource with 0 Comments

Property investors have considered HMOs (also known as houses of multiple occupancy or houses in multiple occupation) as one of the most attractive investment methods for a long time. It essentially helps them receive more income from a single property. If you too are planning to explore this method, this guide is for you. It’ll help you get the answers to all your questions regarding HMOs.

What’s an HMO?

An HMO refers to a residential building that’s rented by three or more tenants forming multiple households. Here, the bathroom and kitchen facilities are shared between the tenants. A converted house can also be considered as an HMO providing it has one or multiple flats, which aren’t entirely self-contained. It’s also important to note that the property has to be used by the tenants as their main or only residence. If you rent out your property to migrant workers and students, it’ll be considered their main or only residence and hence, the house will fall under the category of HMOs. The same will be applicable if the property is used as a domestic refuge.

What isn’t an HMO?

Your property will not be considered an HMO if it meets the following aspects.

  • You and your household are resident in the property with a maximum of two tenants
  • The main use of your house isn’t residential accommodation
  • Occupants are forming a single household
  • Occupants aren’t using the house as their main or only residence
  • The building is controlled or managed by a public body such as the NHS or police

Why you should invest in an HMO

Let’s take a quick look at a couple of reasons why investing in HMOs has become a preferred option among property investors.

  • Less vacant periods: When it comes to renting single BTL property, vacant periods are an unavoidable part of the process. However, with HMOs, this effect on your income is relatively lower as there are multiple tenants. If one moves out, your financial security will still be there.
  • High demand: Young professionals and students, for whom renting an entire self-contained flat or house isn’t an economically viable option, usually turn to HMOs to rent individual rooms. It offers them a flexible and affordable living option than single-tenant properties.

Does your HMO need a licence?

Before delving deeper, you need to understand the difference between a large HMO and a small HMO.

If your HMO is minimum three storeys high, has a minimum of five tenants forming multiple households, and has kitchen and bathroom facilities shared between the tenants, it’ll be considered a large HMO.

And if the HMO has a minimum of three tenants with other conditions remaining the same as a large one, it’ll fall under the category of small HMOs.

If you’ve got a large HMO, you’ll be required to obtain a licence from the local authority. It’s important to note that even if you own a small HMO with less than five tenants, a licence may still be required. Therefore, we strongly suggest you check this with the local council. You should also note that some large HMOs, where there are seven or more tenants, come under the Sui Generis use class. If your HMO falls within this class, you may need to obtain planning permission from your local authority instead of a licence.

Closing thoughts

While HMOs tend to produce more security and greater yields than traditional rental properties, they involve a lot of work on the part of the landlord/investors. These typically include dealing with building maintenance, regulatory compliance issues, etc. However, if you can adhere to the rules and regulations, investing in an HMO could be a win-win situation for both you and your tenants.

Share This

Reserving Your Property

What Are The Steps?

1. One of our dedicated consultants will contact you to discuss your new property purchase and answer any questions you may have.

2. We send you our Non-Disclosure & Non-Circumvent Agreement and Finders Fee Agreement for you to sign. These standard agreements protect all parties involved from disclosing confidential information about the vendors and the deal or contacting them directly.

3. You Pay your Finders Fee. We understand that you may feel uncomfortable paying your Fee at this stage, but this Fee is fully refundable and gives you exclusivity to the deal so that no other buyer can access it.

4. We arrange for you to go and view the property. We believe it is important that you or your representative view the property you are about to purchase to make sure that it is the right fit. We ask that you make yourself available to view the property promptly as most of the vendors are looking for a quick sale and require speed and certainty.

5. After viewing the property, we will discuss your feedback. You decide whether you wish to proceed with the purchase/ rental.

6. If you wish to proceed, that’s fantastic. We will send you a Purchase Agreement and request some basic information: Full name and address of the buyer, proof of I.D, address, and solicitor details etc.

7. If you do not wish to proceed, that’s ok too. We will refund 100% of your Finders Fee. You email [email protected], and we will ensure a full refund within 48 hours of your email.

Sourcers Info

1. Upload Your Property to our Portal

After you have created your User Account, you can proceed to upload your property deals.

2. Assessing your deal

One of our Support Team will review and assess your property and will call you to finalise the details if required.

For us to assess and publish  your property, you will need to upload:

Full Address
Pictures of the property
Floorplans
Videos if available
Comparables of similar properties sold in the area and for sale
Rental comparables

If we are happy with everything, we will publish your property live on our site for waiting buyers to access.

3. Prospective Buyer

As soon as your listing is live, our buyers will be able to view the property details and contact us to reserve your property. Our Support Team will speak with the buyer to formally reserve the property and arrange a viewing. We will liaise with you to fix the most convenient time with the vendor for viewing.  There is a better prospect of agreeing on a sale if the buyer views the property quickly, so we ask that you are flexible & prompt with the viewing arrangements.  

4. Completing Your Sale

Once the buyer has agreed to purchase your property, our team will manage the process until completion. We are available to assist with all matters to get the deal closed as quickly as possible. 

We are available by email: [email protected]

We are transparent about our fees, and we split the Finders Fee on a 50/50 basis on properties sold.