Tag: landlord

Advice Center, Conversions

All that you should know about becoming an HMO landlord.

14th December 20210

Some landlords choose to convert their properties into HMOs (house in multiple occupation). This is because landlords find this an efficient way to run a rental home. An HMO is a term that refers to residential properties that are rented out by at least 3 people who are not from the same household. However, they share facilities like the bathroom, kitchen, and living rooms.  

HMO licence –  

Becoming an HMO landlord might require you to apply for a house with multiple occupation licences. You must have a licence if you’re renting out a large HMO. Your property is defined as a large HMO if the following apply:  

  • It is rented to 5 or more people who form more than 1 household.  
  • Some or all tenants share toilet, bathroom, or kitchen facilities. 
  • At least 1 tenant pays rent.  

The licence is valid for a maximum of 5 years. However, you would also need a separate licence for every HMO property that you own. 

Conditions a landlord must follow – 

  • The house is suitable for the number of occupants. – It is often advised to have 5 tenants or more in each house. This is so the tenants can successfully spread the costs of electricity, gas, water, and council tax sufficiently to create a healthy profit. Although the number of tenants you have depends on the size and number of bedrooms of the property.  
  • The landlord or manager of the house must be considered fit and proper. For example, having a criminal record or breach of landlord laws.  

Landlord responsibility- 

The council has to carry out a housing health and safety rating system risk assessment within 5 years for getting a licence.  

You need to:  

  • Send the council an updated gas safety certificate every year. 
  • Install and maintain smoke alarms and carbon monoxide alarms 
  • Provide safety certificates for all electrical appliances.  

If the inspector finds any unacceptable risks during the assessment, you must carry out work to eliminate them.  

You will have to pay income tax on your rental income, minus your day-to-day running expenses. And also, class 2 national insurance if the work you do renting out a property counts as running a business.  

Reporting changes –  

It is important to let the council know if there are any changes. These changes might include:  

  • Your tenants make changes 
  • You make any changes to the HMO 
  • Your tenants’ circumstances change. For example, if they have a child.  

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Advice Center

The Ultimate Guide To An HMO Property

19th October 20210

What is an HMO? 

A house in multiple occupations (HMO), is a property rented out by at least three people who are not from one household, for example, a family. However, they share facilities like the bathroom and kitchen. They’re known as house shares.  

However, many types of accommodation could be an HMO. These may include:  

  • Hostels 
  • Lodgings 
  • Shared houses 
  • Refuges 
  • Private halls of residence 
  • Blocks of converted flats 
  • Employee accommodation 
  • Building containing numerous bedsits with shared facilities 
  • Buildings containing flats with their own facilities, but are not self-contained 

Design –  

In HMOs, the bathrooms, kitchen, stairs, gardens and landings are designated as common areas shared by all tenants. In addition, the house may be divided up into self-contained flats, bed-sitting rooms or simple lodgings. 

What determines whether the property is an HMO or not? 

Properties must have these four common features before being classified as an HMO: 

  • Occupants are not forming a single household 
  • Occupants must be using the property as their main residence 
  • Used for residential purposes 
  • One of the occupants must be paying rent  

Households are regarded as family members living together or single people living alone.  

HMO Licences – 

HMOs require a licence from the local council in the area the property is located, which is valid for five years. For instance, the general rule is that any property with five or more people from two or more separate households that share facilities requires a licence. Although this depends on the council, some smaller properties with fewer tenants can also require a licence.  

The standard HMO licence fee is £1,100, split into two payments. For larger HMOs with more than ten units of accommodation, the fee increases by an extra £50 for each additional unit of accommodation.  

The pros and cons of renting an HMO by room  

Pros  

  • Usually more profitable as you can charge a higher rent per room 
  • Can let the room on a licence (this makes things easier if you need to evict a tenant) 
  • You cannot be excluded from the common parts. Only individual rooms 
  • If one tenant leaves, you are losing less rent than if a whole group moves out 

Cons  

  • So, you will be responsible for paying and managing bills  
  • Tenants do not know each other which may result in mismatch of personalities and potentially cause issues 
  • A tenant is only responsible for their room, not the common parts. In addition, this means if there is any damage it may be difficult to prove who caused it  

Are HMOs profitable? 

HMOs can be very profitable because you can charge rent per room that totals more than if you let the property to one household. For example, you could rent a 3-bed property for £1000 per month to a family, or 3 rooms for £400 each giving a total of £1200.  

Are you aware of the HMO Changes for Landlords coming into effect in October?

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