Are you considering an HMO conversion? HMOs can be a great investment property, helping property owners generate a healthy, stable income and increase their property portfolio profits. They’re an incredibly popular investment type, offering competitive yields and greater security, and generating high levels of demand from various tenant types. However, there are set legal requirements and responsibilities you need to consider before converting a property into an HMO.
If you want some advice on how to convert your property into an HMO, read our HMO conversion guide and discover our expert tips for converting a property into an HMO. Whether you’re looking to purchase a property for the purpose of a HMO conversion or you want to convert an existing property into a HMO to boost your rental income, read on to discover our top tips.
First of all, let’s explain exactly what an HMO is. HMO stands for houses in multiple occupation. HMOs have at least three tenants, forming more than one household, and these tenants share toilet, bathroom, or kitchen facilities. A household is classified as a single person living alone or members of the same family who live together, including couples who are married or living together.
HMOs are a great way to generate income through property. They can provide increased revenue as you collect rent from a higher number of tenants than in a standard, individually rented property. It also provides greater financial security for landlords as you aren’t dependent on a single household or tenant for the rent, so if one tenant does fall behind, you still have rent coming in from the remaining tenants. HMOs in the right location, such as in city centres or near university campuses, can be very lucrative and easy to rent out as there is usually high demand for HMO rentals in these areas.
There are certain requirements for your property to be a HMO (more on this a little later), so if your property is not already HMO-ready, you may need to make adjustments and convert your property to make it suitable for HMO tenants. If your property is converted into an HMO, it will be visited by your local authority within five years, so they can ensure it is up to standard. They will carry out a Housing Health and Safety Rating System risk assessment to identify any issues, so bear this in mind and ensure your property meets their guidelines.
Converting a property into an HMO may require planning permission; this all depends on your local authority regulations and whether you are converting the property into a small HMO or a large HMO (sui generis). Large HMOs, with over seven or more people sharing, will need planning permission to change the use of the property to an HMO, but a residential property can usually be converted to a small HMO under permitted development.
A standard HMO property must be rented out by at least three unrelated tenants from more than one household, who share the facilities. Before taking on an HMO conversion, ensure it’s actually suitable to be an HMO. It needs to have capacity for at least three bedrooms (that fit the minimum HMO room sizes), have a large enough kitchen and bathroom, and have the correct appliances and equipment, e.g., bathrooms must have functioning locks and any shared bathroom or toilet has to be accessible through a common area – not someone’s bedroom.
One of the most crucial things you need to get your head around before taking any steps to convert a property into an HMO is understanding the legal requirements and responsibilities associated with converting and owning a HMO. You need to understand what legal requirements are in place in regard to the actual property, how it must be converted, and what amenities must be available to tenants, as well as understand your legal obligations as an HMO landlord.
There are HMO license requirements to consider, minimum room sizes, kitchen and bathroom requirements, and fire safety requirements. For more detailed information on HMO requirements, read our blog: What are HMO requirements UK?
Before you start any work to convert your property into an HMO, contact the local council for approval. Once you have the approval, this will act as an insurance policy that you have the right to convert your property into an HMO and run it as one, so they don’t later come along and deem it unlawful. There are three main areas the local council will look at:
When converting your property into an HMO, focusing on ensuring the kitchen and bathroom(s) are up to scratch and look nice is a smart option. These rooms can often be a dealbreaker with tenants if they are dated, grimy, or not finished to a high standard. Tenants’ expectations in these areas are usually high, so make sure you furnish to a high standard and ensure they are modern. This will probably make all the difference in getting your property rented faster and easier.
People often want to keep costs down as much as possible, but it’s worth investing in better quality appliances and home furnishings. There’s no point in being cheap when it comes to things like fridges, kitchen appliances, beds, and couches, as it’ll end up costing you more in the long run. Due to the nature of HMOs having several tenants, things get heavily used, so it’s worth getting something better quality and more hard-wearing; otherwise, they’ll just break easily, and you’ll be constantly replacing things, which gets expensive.
Everything should be finished, and the property should be safe and ready to move into before you let it out to tenants. No tenant wants to live in a building site, and you legally must have certain things in place for tenants in order to let it out and meet safety requirements. Save yourself from potential costly repairs or legal action being taken against you, and ensure your property is fully converted and meets all HMO requirements before you let it out.
Ultimately, the best way to make your HMO property stand out from the rest is to finish it to a high standard and ensure it has all the necessary requirements met. The better the rooms in your HMO, the quicker it’ll get rented out. Of course, it’s always a good idea to purchase a property in a sought-after area, too. Think city centres or neighbourhoods near parks, shops, universities, good nightlife and leisure facilities, or business districts.
Consider the local area and whether there is enough interest from prospective tenants looking for HMOs. Also, look at other HMOs in the area and see how you can make yours better and a more attractive option. That could be offering an outside space for them, more common rooms and communal areas, better facilities, and a nicer quality finish.
EveryTrade specialises in the construction and conversion of high-quality HMO investment properties across the UK. We understand all the regulatory requirements and what makes a HMO property profitable, so we can ensure your property meets all requirements and can maximise your returns. Our expert team has extensive experience in creating functional, durable, and aesthetically appealing HMOs that attract tenants and optimise occupancy rates.
For more information on how we can help you with your HMO conversion, get in touch with our team today! Call us on 0161 464 7177 or email us at info@tdgcontracts.com.
