An HMO property, or a House in Multiple Occupation, is a type of rental property that is owned by a private landlord and shared among multiple tenants. HMOs are typically houses or flats where several distinct tenants rent individually, including their rooms and the communal areas of the property. HMOs can also be hostels, multiple bedsits in a large building, converted flat blocks, and self-contained cluster flats. An HMO is essentially any property that houses three or more tenants from more than one household (i.e., unrelated) and shares bathroom and kitchen facilities.
To be classified as an HMO, properties must have four common features before being classified:
- Occupants are not forming a single household (family members living together do not constitute separate tenants).
- Occupants must be using the property as their only or main residence.
- The accommodation must be used solely for residential purposes.
- One of the occupants must be paying rent.
HMOs are popular with buy-to-let investors because they can generate multiple income streams from separate room rentals. HMOs typically yield higher profits than traditional buy-to-let properties because they can generate multiple income streams from separate room rentals. However, HMOs come with greater risk and require more money upfront to prepare the property for the rental market.
