Should You Convert Your Property Into An HMO?
As property prices rise, many homeowners and investors are looking for ways to maximise their rental incomes. One strategy that is becoming increasingly popular is converting a property into a House in Multiple Occupation (HMO). But is this strategy right for you?
In this blog, we’ll explore the pros and cons of converting your property into an HMO, and look into further considerations such as any specialist landlord insurance you may need.
What Is An HMO Property?
An HMO is a property that is rented out to three or more tenants who are not part of the same family or household. More specifically, the tenants of an HMO will share common areas such a kitchen or bathroom.
These types of rental property are subject to specific regulations and requirements, such as:
- having appropriate fire safety measures
- need for specialist HMO insurance
- may require a license from the local authority.
With this in mind, you may decide that converting your property into an HMO may not be for you. We’ve put together our pros and cons to help you come to an informed decision.
Pros Of Converting Your Property Into An HMO
The benefits of converting your property include:
- Increased rental income – The most significant advantage is the potential to increase your rental income. By renting out individual rooms, you can charge more rent than you would for a single tenancy. This increased income can be used to offset the costs of converting the property and provide a steady income stream.
- More security for the landlord – There is added security in an HMO as you won’t be dependent on a single household for income. Should one tenant move out or fall behind on payments, you will still have rent coming in from the remaining tenants.
- Greater flexibility – HMOs offer more flexibility than traditional buy-to-let properties. You can rent out individual rooms on short-term contracts, giving you the ability to adjust rents and occupancy levels to match market conditions.
Cons Of Converting Your Property Into An HMO
The negatives include:
- Specialist HMO property insurance – As a unique form of rental property, the terms of your landlord insurance will require you to register the address as an HMO. At Flats Direct, we can discuss the details of your property to ensure you’re receiving the optimum HMO buildings insurance and HMO contents insurance
- Increased Management – Converting a property into an HMO will require more management than a traditional buy-to-let property. You will need to deal with a higher number of individual tenants, handle maintenance issues, and ensure the property complies with HMO regulations.
- Increased Risk – Failure to comply with specific HMO regulations could result in fines or even criminal prosecution. You will need to ensure that the property meets all necessary safety requirements and, as mentioned above, that you have the correct HMO insurance in place.
Is Converting Your Property Into An HMO The Right Decision For You?
Ultimately, whether you should convert your property into an HMO depends on your circumstances and investment goals. If you are looking to maximise your rental income and have the time and resources to manage an HMO, it could be a sound investment. However, if you are not prepared to take on the additional management and regulatory responsibilities, it may not be the best option for you.
Before making any decisions, it’s essential to research the local market and understand the demand for HMO properties in your area. You should also seek professional advice from a solicitor, accountant, or property specialist to ensure that you fully understand the financial and regulatory implications of converting your property, as well as the HMO property insurance you may require.
Flats Direct For Your HMO Insurance
Here at Flats Direct, we provide specialist landlord insurance policies that you can rely on. Our experts will take the time to discuss your unique needs and match your property with the ideal HMO insurance to ensure you’re covered.
For more advice on converting your property into an HMO, or to enquire about HMO property insurance, get in touch with us today. Our team have expert knowledge on HMO insurance and the latest regulatory requirements around this. Call us on 0800 731 6242 or email info@flatsirect-uk.com.