Houses in Multiple Occupation are making up an increasing percentage of buy-to-let business, according specialist lender Shawbrook.
In both 2022 and 2023, HMOs made up just over a quarter (27%) of all Shawbrook’s buy-to-let business.
However, as landlords place further emphasis on diversifying portfolios, this number has already risen to more than a third (34%) in 2024. There has also been a rise in HMO business from non-portfolio landlords, from 17% to 21% over the same period.
Daryl Norkett, Director of Real Estate Proposition at Shawbrook, says: “As landlords have dealt with years of challenges stemming from the pandemic and culminating in the past couple of years of economic uncertainty, HMOs have proven to be a sound strategy for landlords looking to diversify their portfolios, as well as strong option for non-portfolio landlords entering the market.
“HMO rental yields are more easily able to afford mortgage lending in a higher interest rate environment, and the regular turnover of tenants allows landlords to stay on track with market rents.
“The option to reconfigure properties and the ability to turn lower yielding single lets into higher yielding HMOs has clearly been a strong draw over the past year or so, as landlords adjust their businesses to succeed in a tougher economic environment.
“We have already improved our HMO criteria to enable landlords to secure larger maximum loan sizes. And, whilst we have already seen a modest increase in HMO activity, once the predicted interest rate cuts finally arrive, we’d expect to see significant growth in this sector.”
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Sensible enough 👍🏻🏠💰💰 but just watch the government look at it like Airbnb’s 😬
HMOs are already being controlled in London boroughs with various versions of Article 4 direction. In most places one will need planning permission to convert to HMO.
There's very little difference in profit on a standard let and an HMO unless they are a student let or at least 6 bedrooms or in an area with an Article 4 Directive preventing more HMOs.
If I let one of my 4 bedroom houses as a family let it would achieve just under £20K a year rent. As an HMO it gets £28K but Council Tax and utilities have to be paid out of that. Last year that was nearly £6K. It also has to be furnished. Usually about £1000 a year for replacement appliances and furniture. So we're down to about £1000 difference, most of which would go in higher mortgage interest payments as most mortgage lenders either load or don't lend on HMOs.
The main difference is voids are usually less painful with HMOs. That's assuming you carefully select your new HMO tenants to try to find ones who will be reasonably compatible with the existing household. On the other hand major improvements or maintenance are far more difficult in an HMO as it is never naturally vacant.
I never wanted a HMO License but weren’t we forced to have them now people think it’s a big deal to have them.
I have always made less income from HMO Licensing and lumbered with all the costs as I have never let rooms individually there you go Jo.
Licensing Applications now taking 15/18 for Councils to issue since they passed the process to metastreet software company and most of Councils are doing it so they don’t have to do anything themselves, sit there having a laugh.
Yes HMOs look good on paper but there are so many problems with them that I sold mine and the rules, hoops costs etc are increasing by the month
But as I sat the numbers do look good on paper only
There is money to be made in 6 bed HMOs but you have to do it right and keep up the ongoing maintenance etc.
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