The advantages of renting out your property as an HMO

The advantages of renting out your property as an HMO

Most landlords rent out their properties as a whole, but leasing your rental property as a House in Multiple Occupation (HMO) provides an alternative approach.

An HMO is a property rented to multiple households who share common facilities. A household can consist of an individual or members of the same family, which includes:

  • Married or cohabiting partners
  • Relatives or half-relatives
  • Step-parents and step-children

An HMO is considered small if it has at least three tenants from more than one household and large if it has at least five tenants from more than one household.

In an HMO, each household rents individual bedrooms and shares communal areas such as the kitchen or bathroom. Despite increasing rental demand, the number of HMOs in the UK has declined in recent years, making it an opportune time to invest.

So, what are the advantages of renting your property as an HMO?

Increased rental yield

Entering into multiple tenancy agreements with different households can result in a higher rental yield compared to renting out a property to a single household. Additionally, you can adjust the rental rates for different rooms to further increase your rental yield. For example, a master bedroom with an en suite can be rented for more than the smallest bedroom in the same property.

Strong demand in popular areas

HMOs offer a new rental option for young professionals and students seeking accommodation without the need for a long-term commitment. They provide tenants with a more affordable and flexible solution in popular areas.

Traditionally, individuals looking to rent would need to find roommates to afford an entire property, which can be challenging when relocating to a new city for work or education. In recent years, there has been a significant shortage of student accommodation in the UK. Consequently, HMOs have become increasingly popular in university cities to address this shortfall.

Converting an existing rental property into a HMO

Converting your existing rental property into an HMO requires time, effort, and careful attention to detail to ensure it meets HMO standards.

There are minimum room size requirements based on the number of occupants sharing each bedroom. Your property must also comply with safety regulations, such as installing fire doors.

You will need an HMO license if your property has at least four tenants forming two or more households. Some local councils require an HMO license for smaller properties as well, so you should contact your local council for more information.

Reduced void periods

A void period is the time between tenancies when your rental property is unoccupied. As a landlord, you will want to avoid extended void periods, as they can diminish your rental income, especially if you rely on rent to pay your mortgage.

Renting your property as an HMO can help minimise the duration and impact of void periods. Since an HMO is rented out by individual bedrooms rather than the entire property, it is less likely that the property will be completely empty at any given time. Additionally, you can include a clause in your tenancy agreement requiring the remaining tenants to cover the rent shortfall if one or more bedrooms become vacant.

How can we help you?

Interested in discovering the potential rental income of your property as an HMO? Book a complimentary rental valuation to explore your options with our knowledgeable team today by calling 01634 570057 or booking online.

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