The Landlord's Guide to HMO Licences 2023

HMOs, or Houses in Multiple Occupation, refer to properties that are being rented out to multiple residents who are not part of the same family. To count as an HMO, the property must house at least three tenants and include shared facilities like bathrooms and kitchens.

For some HMO properties, landlords will be required to hold HMO licences. If you're the landlord of an HMO but are unsure if you need a licence, read on to find out more about what they are.

What are HMO Licences?

An HMO licence is something that a landlord is legally required to acquire if they are in charge of a large multiple-occupancy home (more than 5 people from more than one family). If the HMO you rent out is smaller than this, whether or not you need a licence will depend on your local council's regulations.

There are some nuances involved, so make sure to check the requirements for your council using the government website.

It is worth noting that these licences last for five years, and after this period expires, you will need to get a new licence for your HMO to continue renting it out.

What is the HMO licence fee?

The HMO licence fee must be paid for you to be able to rent out a multiple occupancy home. Ordinarily, this is paid in two instalments: the first when you apply for the licence and the second once it is sent out to you.

The fee usually amounts to around £1,100, but can vary from council to council, so make sure to check the cost for the area where you live. If your property is larger, it may incur higher licensing costs, but this also varies depending on location.

How to buy an HMO property

When it comes to HMO property investment, there are two ways to start renting out an HMO. You can either buy an HMO that already exists as a multiple occupancy property or you can choose to convert a property instead.

When you buy a pre-existing HMO, you will need a specific mortgage so that you can rent out rooms to separate tenants. On the other hand, if you want to convert a property into a multiple occupancy home, you may not qualify for an HMO-specific mortgage until all of the work has been done.

Instead, you could consider looking into development loans, bridging finance or refurbishment loans if you need to raise funds to make these changes.

How to manage HMO property

An HMO is a large undertaking and it is not something to get into without doing your research first to ensure you are prepared. Running a multiple occupancy building does require a lot more time and effort than ordinary renting.

Having a range of individual tenants rather than a group can mean that you have to deal with greater turnover, and you will have to follow move-in and move-out procedures more frequently. This also means that you may need to regularly advertise your rooms to replace any tenants that leave.

Due to the fact that HMOs house more tenants, they often need more upkeep and maintenance, which can be expensive and time-consuming.

If you don’t have experience with running an HMO, the best option is to get in touch with someone more experienced for guidance or find a letting agent who can handle these tasks for you. Once you're more confident, you may decide to manage your HMO on your own.

Are HMO properties a good investment?

Despite all of the extra work and effort that goes into HMO properties, there are also a lot of benefits, especially financially. One of the bigger draws of HMO properties is that you can expect more rental income than an ordinary rental property.

If you are looking to generate a good profit, HMO properties are an ideal investment; however, this is only true if you can dedicate the time and money needed to make sure your HMO is kept in good condition and continuously has tenants living there.

HMO properties are attractive to a wide range of tenants, including students and graduates looking for short-term accommodation, and young professionals who can’t afford a self-contained flat or home.

This is encouraging for landlords of HMOs as it promises fewer periods with empty rooms, meaning that you are likely to increase your income stream even though it can be more work. The difficulty is in finding a suitable property, but once you have an HMO up and running, you will definitely see positive returns.

Who can help?

If you are looking into becoming the landlord of an HMO or you already are and simply need tips or advice, Property Data can help you.

We have data from a wide range of sources to help you make the right decision. Whether you need an HMO valuation or to calculate the likely rental yield, why not try PropertyData for free today!