Buying a house of multiple occupation (HMO) can be a lucrative investment opportunity, but it is also a complex one that requires careful consideration of the various risks involved. In this article, we will explore the key aspects of HMOs, including financing, costs, legislation, and planning permission, and how they can impact your investment.

Financing

The first step in buying an HMO is to secure the necessary financing. As with any real estate investment, you will need to consider your budget, your creditworthiness, and the type of loan you want to apply for. HMOs are often considered to be higher risk than traditional residential properties, which means that you may need to provide a larger deposit or a more detailed business plan to secure a mortgage. You should also factor in the costs of purchasing and managing the property, as well as any repair or maintenance costs that may arise.

Costs

In addition to the costs associated with securing financing, there are also ongoing costs involved in owning and managing an HMO. These include the costs of utilities, insurance, and property management, as well as the cost of any repairs or renovations that may be required. You should also budget for the cost of any necessary licenses or permits, such as planning permission or fire safety certificates.

Legislation

The legal requirements for owning an HMO vary depending on where you are located, but there are several key areas that you should be aware of. These include the Health and Safety at Work Act, which requires landlords to ensure that the property is safe and free from hazards, and the Housing Act, which sets out the standards for rental properties and the rights of tenants. You should also be aware of any local bylaws that may apply to HMOs, as these can impose additional restrictions or requirements on your property.

Planning permission

Planning permission is a key factor in the success of an HMO investment. Small HMOs typically require less planning permission than larger HMOs, as they are considered to be less impactful on the local community. However, even small HMOs may need to comply with local planning laws and regulations, such as minimum room sizes or maximum occupancy levels.

Large HMOs, on the other hand, typically require more extensive planning permission, as they are considered to be more intrusive on the local community. This may include restrictions on the number of tenants, the number of storeys, or the size of the property. You may also need to provide additional documentation, such as a fire safety certificate or a disability access certificate, in order to obtain planning permission.

Mortgage choices

The mortgage choices available to you will depend on a number of factors, including your creditworthiness, the type of HMO you are purchasing, and the location of the property. Small HMOs may be eligible for conventional residential mortgages, whereas larger HMOs may require a specialist HMO mortgage. Specialist HMO mortgages are typically more expensive than conventional mortgages, and may also require a larger deposit or a more detailed business plan.

In conclusion, buying an HMO can be a lucrative investment opportunity, but it is also a complex one that requires careful consideration of the various risks involved. You should be aware of the costs involved, the legal requirements, and the planning permission required, and you should also carefully consider your financing options in order to secure the best deal. By taking these factors into account, you can minimize the risks involved in HMO investment and maximize the potential for success.