London HMOs: Top 10 Things you need to know as a Landlord

HMO stands for Houses in Multiple Occupation. Usually an HMO takes the form of a large house which is converted internally into separate dwellings or a family property with many bedrooms that can be rented out to individual tenants. Unlike a block of flats, however, there are shared communal facilities, such as bathrooms, kitchens and living rooms.
A property qualifies as an HMO if there are more than three tenants living there that form more than one household. There are also two HMO classifications: small or large, depending on the size of the property and the number of tenants.
There is a strong demand for HMO properties to rent in Camden Town and Kentish Town, due to the close proximity to universities and employment hubs.

HMOs remain very popular among students as the rents can be more cost effective than letting a property on a sole occupancy basis. Students are also drawn to the community vibe which is often fostered in HMOs and are less precious about having their own private space. HMOs are however becoming increasingly more sophisticated and are appealing to young professionals who are moving out of the family home for the first time.

HMO yields are what makes them a very attractive property investment proposition. The Complex Buy to Let Index published in April 2016 by Mortgages for Business showed that HMOs returned the highest yields for landlords than any other form of buy-to-let in Q1 of 2016, with an average yield of 10.2% (up from 9.1% in Q4 2015).

While on paper HMO yields look outstanding, there can be extra expenses relating to running such an investment property. For starters, the number of people under one roof will create more wear and tear and the possibility for emergency maintenance situations may increase. There can also be a higher turnover of tenants and the necessity for more frequent property inspections. These facets can easily be addressed by partnering with a professional property manager at a lettings agency, who can ensure the smooth running of an HMO - from tenant referencing and deposit safeguarding to rent collection and check out.

If you own an HMO, you will have extra legal responsibilities on top of those that apply to landlords of regular buy-to-lets. These responsibilities include:-

• Extra fire, gas and electrical safety precautions, testing and provisions.
• An obligation to ensure the property is not overcrowded.
• The provision of adequate cooking, drainage and washing facilities.
• The requirement that communal areas and shared facilities are clean and in good repair.
• The provision of enough refuse facilities and bin bags.
• Ensuring the property is free of hazards that could compromise the health and safety of occupiers.

Landlords with a large HMO must obtain a licence from the local authority in order to run a legally compliant HMO let. There are also requirements from some local councils for landlords of smaller HMOs to also obtain a licence (called additional licensing), so you must check with authorities on a property-by-property basis - there are large fines for those that don’t abide by the rules.

A large HMO is classed by the following:-

• Is at least three storeys high.
• Has five or more unrelated people living in it.
• Has two or more separate households living there.

Is a discretionary power to extend licensing to smaller types of Houses in Multiple Occupation (HMOS). Local authorities have the right to introduce such schemes subject to local consultation. In order to introduce Additional HMO Licensing schemes, local authorities are required to consult with local residents, landlords and tenants for a minimum of ten weeks. They are then required to provide evidence for introducing a scheme, such as showing that there are significant management issues or condition of the property that need addressing within a designated area. Once a designation is confirmed landlords who operate within this area will be required to apply for an HMO licence for each of their properties within the area.

London Residential can help landlords apply for a large or additional HMO licence, taking away the administration commitment.

Many property investors shy away from HMOs as they perceive the amount of hassle and associated administration not worth the yield return. The demand for HMOs, however, is increasing as the lower rents associated with renting a room in a shared house is ultra attractive in today’s lettings market.
When managed professionally, a landlord can enjoy the yields of the HMO without any of the management duties. As well as looking after any licensing and administration, London Residential’s dedicated HMO property managers will take on the practical side of management, including planned and emergency maintenance. We can also help prepare the condition of any HMO ready for any potential pre-licensing inspections using our trusted panel of contractors, engineers and builders.
London Residential would be delighted to find you a property suitable as an HMO, help you set up a legally-compliant tenancy and run the HMO on your behalf. Ask for our advice today.

Landlords should consider offering tenants in HMOs a ‘bills included’ rental package, sidestepping the difficult process of dividing up utility costs and the risk of unpaid bills. Good broadband/wifi is essential, with a service that can cope with multiple users at the same time. It might also be worth including the cost of a weekly cleaner into the monthly rent, as properties used as HMOs can quickly become unkempt.

Yes! Employing a Property Manager makes perfect sense. London Residential’s Property Managers look after a number of HMOs, ensuring that the properties are legally compliant and well maintained. There will be more wear and tear in an HMO and there may be more emergency maintenance issues that need addressing, so having a professional on hand is vital in protecting the property asset. A dedicated Property Manager from London Residential will supply a wide range of property management services, from finding tenants, referencing, check in and check out services, and tenant deposit protection to rent collection, regular inspections, planned and emergency maintenance, and tenancy renewals.

For a selection of properties for sale in North West London that are already set up as an HMO, for houses that are suitable for converting into a house share, more in-depth advice on HMOs and for details of our full property management service, contact the London Residential team today.