HMOs houses in multiple occupation are a good strategy to increase cashflow on your property.

It is easy to see why HMOs houses in multiple occupation have become so popular over the last few years. The demand for affordable housing is increasing in most large towns and cities and there is currently a lot of pressure on the housing market to supply cheap and flexible living for different tenant types.

Not only do HMOs (houses in multiple occupation) provide more affordable social housing for students and professional tenants, but it also increases capacity within a single build providing an excellent return for landlords.

That said, here is what you need to know about HMOs (houses in multiple occupation) to get started:

1. Do the Research

It is important to first research the area to understand whether there is a demand for HMO (houses in multiple occupation) renting wherever the property is located. Obviously, the best HMO areas are in cities or larger towns with a high population of students or young professionals. You may also need to apply for a HMO (houses in multiple occupation) license and adhere to strict housing laws depending on the type of property, how it will be occupied and your local council’s specific rules. Different local authorities operate in varied ways, so if in doubt, always approach your local authority before you take any tenants.

2. Get a mortgage

When deciding to take on a house in multiple occupation property as an investment, it is quite likely a mortgage will be required. If you need a deposit consider equity release. Getting a mortgage for a HMO property can be straightforward, provided you seek the right counsel. Make sure to take into account that a normal buy-to-let mortgage will not suffice and may be considered as fraud if you use it for HMOs.

3. Understand the benefits and the costs

The real benefit of HMOs (houses in multiple occupation) is the increased rental yield of a minimum of 12%, meaning you could quickly generate a good recurring income. On the flip side though, HMOs require a lot more man management and therefore take up more of your time. Running costs are also higher, when you factor in maintenance, arrears, utility bills and insurances. You also must consider that you need to search for tenants to fill the rooms, which can be both taxing and stressful. Check out what fees you can charge tenants too.

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