How Can You Tell If A Property Can Be Used As a HMO? (Part 1)

By Matthew Moody | Property Investing

Jul 08

This is an interesting one – and a question I get asked ALL the time!

There’s basically a couple of schools of thought on this and the simple answer is – it all depends on how much cashflow you want to make!

Generally speaking; when you convert a property into a HMO, you normally include the bills as part of your rent.  Now given that bills can be as much as £130 per tenant per month, you need to make sure that you will be generating sufficient cashflow to cover this cost.

I generally look at it from the point of view of rooms being boxes – so a 4 bedroom house with 2 reception rooms would be for me a 5 box house.  3 of the boxes would cover my mortgage, the 4th box the bills and the 5th box is PURE cashflow to you.

The official definition of a HMO classifies any property where two or more unrelated people are sharing but this covers everything from a flat with two flat mates right up to a 20 bedroom HMO!

Here are some tips that I use when determining whether a HMO is going to work or not:-

  1. How near is it to a shop, local amenities, bus route or any sign of life!  Its no use buying a lovely large house in a village or a field or a suburb that is miles from the city centre – room sharers are generally not going to be interested
  2. Does it have enough reception rooms that I can keep one free for the sharers to use as a communal living area?  You don’t need to do this but do you want to be a landlord who isn’t keen on maintaining standards and isn’t interested in making sure their tenants are looked after?  Would you want to live in a 10 foot square room with only a kitchen and bathroom to congregate in – I wouldn’t
  3. Does it have enough parking for at least half of the rooms you intend to let out?  You can get away with on-street parking but only in a quiet street where there is plenty of parking (I have one or two where it works).  Generally, the more off-road parking you are, the more attractive this will be and especially to those higher paying professional tenants.
  4. Is it attractively presented from the outside?  Like it or not, a tenant is sold on the house from appearances and first appearances count.  If you have weeds growing everywhere, rotten window sills and paint peeling from the door – your prospective tenant is going to think – uh oh, if its this bad outside, what will it be like inside!

So there’s a few to be getting on with, watch out for my next post where I talk about how you review the inside of a house for the optimum HMO.

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About the Author

Matthew founded Your HMO Expert in 2006 and since then have provided the authoritative place on the web to come to find out how HMO Property Investment works and how you can get started.

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(1) comment

Kay October 27, 2015

They haven’t broken any laws as far as I’m aware.Prohibiting paeerympnt meters is possibly an HMO restriction set out by the Local Authority, perhaps to prevent landlords reselling energy to their tenants at exorbitant prices or to prevent issues with any fire alarm/emergency lighting systems if the credit runs out (I’m speculating here). I would notify the authority (in writing) and if the paeerympnt meter is not doing any harm then it’s probably not going to be an issue.The tenant has the right to choose their supplier (OFT unfair terms ruling) and if that supplier insists on a paeerympnt meter there probably isn’t much you can do about it, unless the Local Authority really do kick up about it.The problems will probably come at the end of the tenancy if you want the meter removed. Different suppliers have different policies, but some charge for the removal of paeerympnt meters. Some suppliers will change it over to credit meter free of charge for new bill payer. Alternatively if they are going to charge, you could ask a new supplier if they’ll swap it free of charge if you switch suppliers. It really all depends on the supplier but if it does result in you being out of pocket in any way then I don’t see any reason why you shouldn’t be able to charge it from the tenant’s deposit.

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