With the increased government pressure on buy-to-let landlords, many are trying to find ways of increasing the value of their investment. HMO (House in Multiple Occupancy) is often considered the answer, but this comes with its own set of challenges and pitfalls. In this post, we detail some of the issues faced by landlords looking to convert homes into multiple occupancy lets.
“A house in multiple occupation is a property rented out by at least 3 people who are not from 1 ‘household’ (eg. A family) but share facilities like the bathroom and kitchen. It’s sometimes called a ‘house share’.”
For homes which are 3 storeys high and have 5 tenants sharing the facilities, you will need to obtain a special licence from your local council. Depending on your council, you may need a licence even if your multiple occupancy doesn’t exceed these barriers. If you have more than one property with multiple occupants, you will need a licence for each one.
You will also need to make physical changes to the building, and meet certain requirements. Smoke alarms need to be mains-wired, and installed in all key areas of the building. Some councils also dictate that all doors need to be special fire doors. All electrical items that you include, like microwaves or fridges, must pass safety inspections, and an updated gas safety certificate must be presented annually.
If you’re converting a home into a HMO, there are several issues that will need consideration. You may need to convert rooms into extra bathrooms, you might need to build partition walls or make other physical changes. Homelet describe the situation:
“You may…need to move or construct walls to alter room sizes – these are all aspects you’ll need to plan carefully before undertaking. And, of course, it’s advisable to use a professional when working on the more significant parts of the conversion. Some landlords convert garages in order to create additional space. These often require planning permission, so you’ll need to check with your local authority. Converting reception rooms is often essential, but not always the right decision. In the perfect scenario, the property will have two reception rooms – one of which can be converted, leaving the other room to remain as a dining or living space. Tenants can sometimes be put off properties with no living room or reception space, so it’s something you’ll need to consider carefully.”
If you convert your home into a HMO, you’re likely to see a much higher turnover in tenants than you would otherwise – especially if it’s in a city. This is because HMO tenants are usually young people or students, both groups moving fairly regularly between properties. They’re likely to be slightly less careful of damaging the property in general, and will move in and out without ceremony (or in some cases, any warning).
It’s wise to keep some money aside to make up for the increased wear and tear your property will endure, as well as covering any gaps in rental income should a tenant move out before you’ve had time to secure a replacement.