Leveraging HMO mortgages for greater yields
Following tax changes regarding Buy-To-Let mortgages, a growing number of landlords are looking to convert their single-let property into an HMO (House in Multiple Occupation). But why?
There is a potential yield increase (12-15%) from renting more rooms, particularly in towns and cities and statistics show that this figure is set to continue to grow.
Managing an HMO property is more labour intensive and it is important to keep up to date with information on Regulations and Health and Safety as many HMOs are subject to licensing (where a property is rented to five or more people constituting more than one household, or is at least three storeys high). A property is also deemed to be an HMO if at least one tenant pays rent and if the property’s tenants share toilet, bathroom or kitchen facilities.
Some Local Councils also require planning permission to convert a property to HMO usage, so it is important to check and keep up to date with both Central and Local Government changes.
Running an HMO will increase costs of conversion and maintenance costs will be higher, but this should be covered by the higher yields after the first few years. A good agent can help manage the property on an ongoing basis, this may help avoid rent voids as turnover of renters can be higher than in single let properties, as the property is let on a room by room basis.
Whether you are a new Landlord or an experienced Developer with a growing portfolio of HMO properties, we can help you secure the most attractive deal with up to 85% LTV (Loan-To-Value) for outright purchases or re-finance arrangements.
Get a quote now: Contact one of our dedicated commercial finance advisors if you are interested in discussing your bespoke HMO mortgage requirements for converted or purpose-built properties.
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