Why You Should Keep an Open Mind to Running an HMO
Definition: HMO stands for “House in Multiple Occupation” and is the Government’s definition of a flatshare with at least 3 tenants.
Renting out your property to flatsharers, particularly if they are students, can be a worry for professional landlords so much so that some don’t think the hassle is worth it. However, as the trend amongst ‘Generation Rent’ shifts towards people flatsharing for longer, shutting off this option for your rental properties could leave you losing out on a potentially lucrative source of extra income. The benefits if done right are clear, with the ability to collect rent from a higher number of tenants.
It is also worth noting that people are living in houseshares later into life, meaning the stereotypical flatsharer of a drunken student smashing the place up after a night out is no longer the norm. I co-founded Ideal Flatmate, a new flatsharing platform designed to match up compatible tenants, two years ago and the assumption was that our users would be students and young professionals. Our fastest growing user group in London however, are the over 35s with 32% of our users now falling within this category. Indeed, the average age of a flatsharer across the UK is now 32 and the fastest rising age range is those between 45 and 54, which has grown by 300% in the last five years.
A key problem landlords face is the potential for a higher turnover of tenants. This regular churn hits landlords hard in the pocket, with the average tenant now spending just 18 months in a flat before moving on. It typically takes 22 days to find a new tenant, with the average void period costing £1,869 in lost rental income. Figures also indicate that one in 11 tenants are moving out even before their tenancy agreement ends. By bringing together compatible flatmates who will get along better and stay together longer, Ideal Flatmate are helping deliver landlords longer, more stable and more secure tenancies.
Besides the people living in your property, what other practical considerations are there before converting it into an HMO?
For a start, the majority now require an HMO licence. If your property is let to five or more tenants from more than one household, is at least three storeys high and the tenants share a toilet, bathroom or kitchen facilities, then you’ll definitely need a licence. In any case, it is best to double check with your local authority as some have very different regulations. HMO licences are valid for five years at a time and you’ll require a separate licence for each HMO you’re running.
In order to comply, you’ll need to make sure that a valid gas safety certificate is sent to the council every year, safety appliances need to be available on request, EPCs need to be completed by April 2018 and smoke alarms need to be installed. Again, different authorities may add additional criteria, so there may be other things you need to consider in order to comply.
Depending on how much work needs to be done to the property to convert it, you may also need planning permission to be able to make certain changes. Finally, when carrying out these activities, it is always worth keeping a record of any conversations and documents you are issued with to ensure you are covered in the future.
