A house of multiple occupancy (HMO) is a type of rental strategy where a property is rented out by the room to 3 or more unrelated people, who share the common facilities such as the kitchen, bathroom and living room. This is also called multi-let or a house share.
Each tenant in the house will have their own AST with the landlord, so they can start and finish their rental period at different times. This is different to a single let where there can be more than 3 people in the house but they should all be ‘related’ and will only have one AST with the landlord.
It’s important to note that depending on your area, some councils require landlords to obtain a licence to rent their property out as an HMO. An HMO licence is mandatory if your property is being rented to 5 or more people who form more than 1 household.
HMOs have been around for many years! They are growing in popularity amongst landlords because many consider this rental strategy to be a more efficient way to run a rental property/portfolio, compared to single lets.
Who is a house of multiple occupancy (HMO) for?
The tenant type of an HMO is typically students and young professionals. As a result, this strategy is particularly successful for landlords who have rental properties in university towns/cities and close to good transport links such as train stations.
It’s important to be aware that in order to operate a property as an HMO, landlords have to meet higher standards in regards to safety, sanitation and facilities compared to single lets. For example, smoke/carbon monoxide alarms must be installed etc.
How does a house of multiple occupancy (HMO) work?
HMOs are similar to a single let but instead of advertising the whole property for rent (and renting it out on one AST), you would advertise individual rooms for rent (and issue multiple ASTs to each tenant in each room). Each tenant would then have their own bedroom and share communal areas such as the kitchen, lounge and bathrooms. It is common for landlords running HMOs to advertise their available rooms on platforms such as SpareRoom and Gumtree.
Benefits of a house of multiple occupancy (HMO)
Although there is more work involved with setting up and managing an HMO compared to other rental strategies such as single lets, there are several benefits to this rental strategy.
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Firstly, it is often a higher yielding rental strategy compared to a traditional single let; as you are renting out rooms individually, when the rent of all the rooms is summed, the rent collected each month is proportionately far greater than the amount you could feasible charge a tenant each month renting your whole property as a single let.
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Secondly, because each tenant has their own AST which are likely to be terminating at different times, you will justifiably be able to make more visits to your property (at the end of each tenancy), helping you maintain the condition and control of your property.
Where can I find someone to help with a house of multiple occupancy (HMO)?
At Doormarked we have IPAs across the country who have experience and expertise in setting up and managing HMOs. If you would like to learn more about how you could turn your rental property into an HMO, if you’re unsure of the licensing restrictions in your area, need help turning a property into an HMO or would like to find someone to manage your property as an HMO, use our search to find an IPA in your area who can help you!
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