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Houses Of Multiple Occupation – HMO

The general definition of a House of Multiple Occupation (HMO) is a house which has five or more bedrooms and is more than three stories high. This definition can vary between local authorities. It is therefore best to check the definition with the pertinent local authority before purchasing.

HMO property is principally bought for income purposes as potential capital appreciation is often less than in a non-HMO property. HMO rental incomes are often high and can be in excess of 10% in some cases.

Finance For HMO Property

Lenders deem HMO property as commercial property. Unlike a buy-to-let mortgage which is based principally on the income potential of the property, HMO lending is based on the borrower’s personal circumstances. Applicants for lending on this type of investment property will typically be asked for a full statement of their assets and liabilities. The deposit for HMO property (currently 35%) is often higher than on a buy-to-let property (normally 25%). Given the mortgage restrictions, HMO property investors are cash buyers as a result of a lender’s requirements.

Mandatory HMO Property Licence Requirement

It is a mandatory requirement for HMO property to have a licence. The legislation was aimed at the providing a minimum standard of accommodation for this type of property which is often let to tenants that have a very low income or suffer financial hardness.

To qualify for a licence you must be considered a fit and proper landlord and your properties must meet the new requirements put in place to protect tenants. A licence is required for each HMO property which is owned or managed. Failing to apply for a property licence for a HMO property will be considered a criminal offence and can result in a fine up to £20,000.

HMO Property Overview

HMO property can produce very attractive rental incomes, however given the regulation and mortgage requirements, investment consideration should be balanced against the benefits that a residential buy-to-let property could provide. is as a buyer’s adviser focusing purely on UK residential and commercial investment property. Our service enables our clients to profit from our experience, contacts and purchasing power to negotiate discounts or financial incentives that might not be otherwise available to a single investor. Our recommended investment property is typically provides a rental income ranging from 6% – 10% and has been discounted by 15% – 30% of the market value.

Call us today to find out how we can help you achieve your property investment goals.

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