Whats Involved with House of Multiple Occupancy HMO & Student Lets

Houses with Multiple Occupancy are continuing to be very popular, with more investors now considering this type of investment in their portfolio. The main attraction is the fact that the investor or landlord receives more income as there are multiple tenants, and there is less dependancy and risk than having one sole tenant. From a tenant’s point of view, its cheaper as there are more people paying towards the costs. With the reduction in social housing, the need for HMO’s are growing.

So what exactly makes a property a HMO?

HMO definition for buy to let

A House of Multiple Occupancy or HMO’s are defined as a main home to more than one household a student let property would be a good example of a HMO. Those homes that have 3 or more storeys, occupied by 5 or more persons require a mandatory licence from the council that the property resides in, See chart below.  Additional licensing may also be required and it is always best to check with the council governing that area. We have included an additional flowchart showing when additional licences will be needed. However, there is still a lot of work to do when it comes to the regulatory compliance issues, building maintenance and ensuring the general standards are maintained throughout the property for the safety of the tenant’s. The truth is HMO’s can be a minefield to those that do not fully understand them.

What do we consider when assessing a HMO buy to let application?

Our in-house mandated lending managers will need to see that the applicants have experience within the HMO sector and managing multiple tenants, we like a strong repayment record, and to see they have the ability to cover rental voids and maintenance required. Where the HMO is based is extremely important, as this will determine the demand for these types of properties. For example, a HMO within walking distance to a university or hospital is likely to have strong demand all year round.


Larger properties that have the ability and the location to be converted to a HMO are also popular to HMO property specialists and we are again happy to consider these types of buy to let mortgage applications as long as planning consent for the change into a HMO has been agreed by the local council. With these, the client must be able to demonstrate their experience in converting a property into a HMO and have the relevant licence approved, or had a previous licence on a similar property already. Some council’s limit the amount of HMO’s within an area, so it is always best to check with the local authorities to make sure they are happy with the change in use.

What valuation figure will you lend off? It depends on all the factors of the deal;

Providing the property is located in an area which supports its ongoing viability as an HMO and this is supported by positive valuation commentary, we will lend up to 75% against the Market Value, providing the client can also demonstrate a relevant track record of managing similar sized HMO assets. If, however, there are negative comments within the valuation regarding rental demand or the property’s sustainability as an HMO, we may look to lend against its value as a single residential unit.

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