A HMO, also know as a House of Multiple Occupation, is a property that is rented by more than one household. This includes more than two tenants that aren't from the same household and share an amenity such as a bathroom or a kitchen. It has to be the main residency for the tenants. Below we discuss 5 reasons to convert your property to an HMO.
1. Increased Revenue
Considering HMOs usually have a room-by-room rent system, these properties often generate a higher yield than a single occupancy as you are receiving rent from a higher number of tenants. This income can be up to 3x more than what a landlord might receive if their property was a single occupancy tenancy.
2. Landlord Security
With a HMO, landlords are not dependent on a single household income. In a HMO, if someone moves out or falls behind on rent, the loss is not too large as you will still receive your rental income from other tenants in the property. Furthermore, it is likely that there will be less void periods; with the rental market facing high demand, as one tenant moves out another can move in immediately. This mitigates the risk of potential rental arrears and vacancies.
3. Tax Benefits
Landlords of HMO properties are usually eligible for particular tax benefits such as deductions on property-related expenses. Landlords may also be eligible for an exemption to capital gains tax when selling.
4. Increased Flexibility
Owning a HMO can open you up to a much broader market, and therefore increasing the demand for your property. For example, HMOs are often suited to students, young professionals or a mix. This flexibility increases the likelihood of the property being occupied at all times and reducing void periods.
5. Passive Income
Whilst being a landlord comes with lots of hard work and labour, HMOs open up the opportunity for a passive income. By hiring a property management company, it is possible to earn a rental income without being directly involved in the management of the property.
It is important to conduct valuable research into the property management company you plan on using. Here at Elliot Leigh Guaranteed Rent, we've been in the game for over 20 years. Our scheme for HMO Landlords makes being a landlord hassle-free; we provide a dedicated Property Inspector, who will visit the property every 8 weeks, 24/7 maintenance and rent upfront. Check out more of the benefits of our scheme here.