Skip to main content

5 HMO Myths Busted

By 16 July 2021September 29th, 2021No Comments

For every property strategy out there – even the most successful ones, such as HMOs and Serviced Accommodation, you’ll always find the odd detractor.

Perhaps that’s because, for whatever reason, investing in HMOs hasn’t worked out for them. Or, it could be that they’re just repeating something they overheard at a property investor get-together evening. Maybe such an individual is too nervous to follow an HMO strategy and is trying to convince themselves it’s no good. Whatever, the reason, many myths have abounded around HMOs. Here are five of the main ones and why they are just that, i.e. myths.

1. There are already too many HMOs

Yes, there are a lot of HMOs in the UK, indicating they are certainly successful for many landlords). But that doesn’t mean there’s too many. Local Authority Article 4 Directives are preventing HMOs from going up in particular areas but there are other areas in cities and towns where it’s permitted.

And, if you do feel that there are already many in the particular area you’re interested in, then there is one way to stand above the crowd: and that’s to make yours really high-spec so that you have tenants fighting over each other to rent a room in your property. One way to do this would be to have every room en-suite.

2. There’s too much management involved

With four or more tenants paying individually you will have extra work, even in admin terms. But, the plus side is you’ll also have more income than if you’d let out the same property as an individual buy to let. For instance, you can rent out a five-bedroom HMO for £450 a room, bringing you a monthly income of £2,250. Letting out the same property as a buy to let would only bring you in around £1,700 a month. And, anyway, once you get into the swing of things, you’ll work out your own processes to speed admin etc up. Certainly, investing in a HMO management software makes this side of HMOs a lot simpler these days.

3. You’ll need a licence

Not all HMOs need to be licensed. HMOs that have four bedrooms or less don’t require a licence (unless they happen to be located in an area where there is an Article 4 directive). It’s only the HMOs offering living accommodation for five people or more that automatically require a licence.

4. You’ll require planning permission

Again, not always. Converting a residential home into an HMO is fine under Permitted Development Rights, and provided there is no Article 4 directive in the area. The problem is when you plan on having an HMO with at least seven individual rooms to rent out. That’s when you will require planning permission because, with that many tenants, the property will fall into a different category of HMO.

5. It’s too costly to start up an HMO

Well, if that was the case then there wouldn’t already be so many HMO landlords. A good guide to savings to kickstart a HMO property strategy is around £50,000, which would bring you profit within one year. But it’s also possible to take over management of an HMO by using a rent-to-rent strategy. Our own in-house funding system here at Sourced provides 100% of the purchase and conversion/refurb costs for all your HMO projects.

Get in touch

Our expert team is always available to answer your questions about HMO property investment and to help you build a successful portfolio that will generate the income you are looking for. To find out how Sourced Franchise can help you generate an income from HMOs, download your copy of our Sourced Network prospectus.