To HMO or not to HMO that is the question?
One of our most frequently asked questions is: Should I buy and HMO? Or What are the benefits of getting an HMO licence on your property?
The first thing to consider is, do you actually need an HMO licence?
A common misconception about renting out a property is that if it has over two bedrooms, automatically you have to apply for a HMO licence.
That, simply put, is not true!
If you have a property with three bedrooms or more, it is perfectly fine to rent this out without an HMO licence. Yes, you will have to make sure it is meets compliance with the current regulations for electrical, gas safety and smoke detection etc but you can still rent it out.
The requirement to hold an HMO licence only applies if you have three or more unrelated people (not family) looking to rent a property. So in other words if they are related/family you do not have to worry.
This means that you should only consider an HMO licence for properties that you think are suitable perhaps for students or young professionals who want to share with each other.
What are the pros and cons to consider?
- HMO properties tend to have higher rents, so if you are looking to get into a property as an investment, you will get a quicker return.
- HMO’s retain and normally increase their value, which is a plus point when you come to putting your property back on the market
- You are providing a good quality of accommodation for your tenants as it meets stricter standards than non HMO accommodation
- There is a high demand for Houses in Multiple Occupancy, meaning that they have very few vacant periods
- An HMO licence, once approved, is valid for 3 years
- There are restrictions on what areas you can apply for an HMO licence
- There can be significant cost to obtain a licence, if your property is not currently compliant
- Higher wear and tear on your property, due to larger numbers of tenants.
HMO properties work in Dundee, but when applying these pros and cons, you have to do so with the individual property in mind. It isn’t one size fits all.
We recommend that you only consider HMO’s in areas that are not overly residential and look for areas like the city centre or the west end near either University campus.
Inflating rents simply because your property is an House in Multiple Occupation doesn’t work either, look around your property at what similar properties are being marketed at and try.
Make sure the census output area for the property has provision for more licences before applying or purchasing.
And most importantly if you are not sure, ask a property professional.
We have years of experience in ensuring properties compliant, including costing this up for you, applying for licences and setting realistic rental valuations so that your properties remain tenanted and you get the best return on your investment.
Sometimes an HMO licence isn’t the best for your property and we can help you identify the right path to take.
Direct Dial: 01382 207770