Getting finance for residential HMO investment property for wiser investment in property

The investor may take advantages of a leveraged financial position of his initial deposit capital carried out in the investment spanning a medium or long run investment of five to ten years. His investment should keep pace with inflation and offering him a yield on his leveraged investment.

There are actually limits to rental yields an investor may get on a single dwelling BTL landlord rental property, it could be a house or flat or penthouse apartment. Possibly the most he may wish for would be stability from inflation as well as some capital growth of the property value over time. However the rental income minus mortgage payments along with other running costs isn't going to usually produce banking profits each month. This is often merely servicing the investment for the long term gain.

Greater rental yield will come from renting the identical property to a couple of tenant similar to with a student share house, the investor can essentially charge you more per bedroom in the house than he could if he let to a single household family. This begins to move into the realms of what is known as multi-let property - the real estate is let to two or more households. This permits the landlord greater rental yield income as well as minimising his experience of rental voids, if one tenant defaults on rent then there are still rents from the remaining tenancies. This kind of letting arrangement is termed HMO.

The word HMO stands for House in Multiple Occupation and can be applied to properties with bedrooms which let to non-related tenants who then share kitchen and bathroom services, or properties arranged as bedsits. It can also apply to a property that the owner lives in and rents a a small number of rooms out. The universal rule which defines an HMO is usually a property with 3 or more storeys, which is let to 5 or more unrelated tenants. If you are unsure, then you should contact your local Council for advice, as there are regional differences.

The rules pertaining to HMOs were described inside the Housing Act 2004 and also this Act also brought about the formal licensing of HMOs and provided a definite concise explaination what constitutes an HMO. Basically, there must be a basal principle of ‘sharing’ facilities. Examples of this are as follows:

• A house that is turned into bedsits where each tenant rents their own room (which may, or probably won't include a kitchen space) and shares bathroom/shower-room and WC and possibly a kitchen.
• A university student share house, where each student rents merely a room and shares all other facilities - kitchen, communal lounge, bathroom/shower-room and WC.
• A flat or house where 3 or more unrelated tenants share the accommodation and facilities.
• An owner-occupier that has 3 or more lodgers with a licence to occupy their lodging accommodation.

A new class of planning use was unveiled in 2010 called C4 which takes care of all properties where 3 or more people share a dwelling. You should have an HMO licence if the property is:

• 3 or more storeys including a basement and above shops.
• Rented to 5 or more tenants
• Some or all of the occupants share bathroom, WC and/or kitchen facilities