Why Are HMO Lettings Different From Other Property Lettings?

May 13, 2024 | Blog | 0 comments

As a prospective landlord you may be wondering whether to invest in a single-family dwelling or a HMO property While both options offer their own benefits and drawbacks, there are some significant differences between the two that you need to be aware of before you decide to go down the road of HMO property management in England.

First, let’s get back to basics.

What Are HMOs?

HMOs (Houses of Multiple Occupation) are properties housing three tenants or more forming more than a single household and sharing kitchen, bathroom, or toilet facilities. Properties housing at least five tenants are “large HMOs” and they require a license to operate.

Can I Let Any Property Out As An HMO?

One of the biggest differences between HMO and single-family rentals is that virtually all residential properties (except leasehold properties with a lease containing no letting clauses) can be rented out as a single-family dwelling. However, not all properties are able to be let out as HMOs.

Planning And Licensing

Single-let properties require no licence to be let out. When it comes to HMOs, large properties housing five or more individuals must be licensed under national law, while local authorities may require smaller HMOs to be licensed too. Planning permission may also be required for a change of use when renting out a property as a HMO in England, something that is not applicable to single household lets. Since each council area has its own controls regarding planning and licensing, it’s important to contact your local housing department for clarification of the rules before making your investment.

Regulations And Safety For HMO Lettings vs Traditional Lettings

There are numerous rules governing all rental properties and health and safety standards, but HMO lettings regulations and compliance requirements are more onerous.

For a single let, a risk assessment must be carried out, furnishings provided by the landlord must have a fire safe label, working smoke alarms must be fitted on all floors, and clear escape route access must be available.

All these regulations apply to HMOs along with extra requirements including:

  • Installation of smoke alarms in every individual unit
  • Installation of fire doors with closers
  • Installation of an interconnected, main-powered fire alarm
  • The provision of fire extinguishers for each floor.
  • A risk assessment in writing must also be provided for licensed properties.

There may be local authority requirements to comply with as well as these national regulations, so checking with the housing department in England is crucial.

Management And Maintenance Requirements

All rental properties require a certain amount of maintenance and management. All rental homes must be maintained in a good condition and dealing with emails and phone calls from tenants throughout their tenancy is part of the deal.

HMOs, however, come with higher maintenance and management demands. Tenants move out and in at various times and there’s likely to be a higher turnover of tenants which results in more enquiries, advertising, and viewings.

Maintenance costs will also be higher since HMO communal areas are shared, meaning that they are not the exclusive responsibility of any one tenant. For every room, cleaning must be done in between lets and inventories completed for each check in and out. Due to the larger number of people and higher turnover in a HMO, there is likely to be considerably more maintenance required. Appliances are likely to require replacement more frequently too due to the extra wear and tear.

What makes HMO lettings unique is the dynamic between the tenants. They can easily be from all walks of life and may or may not be familiar with each other before moving in. This can result in greater tensions between individuals and an even higher turnover due to disagreements between residents.

Investment And Returns

While the investment in a HMO, both upfront and over time, will probably be higher than that in a single-family dwelling, the potential rental yield can also be considerably higher. Rental income and your net returns can easily be twice as much as that you would receive for a single-family rental, even when considering the extra costs.

Voids are also less common with HMO properties. Since rooms are let individually, there’s less likely to be a month where the rental income fails to cover the costs.

There are many advantages to becoming a HMO landlord in England, but it isn’t always an easy task. Fortunately, with the right HMO property management company in England on board, you can enjoy all the benefits of HMO ownership without the tedious requirements of finding and vetting tenants, dealing with rent payments, and arranging maintenance.

Give the team at The HMO Network a call today on 01245 835859 or email us at beth@charlesdavidcasson.co.uk to find out more about how we can help you maximise your HMO rental profits.