7 Top Tips For A Hmo Mortgage


7 things you need to know about HMO Mortgages from expert HMO mortgage brokers. This blog is designed to help both experienced and new investors considering the HMO market. Read on to find out more:

An HMO mortgage is specifically for properties described as houses of multiple occupation. The definition of this is: “A house in multiple occupation. is a property rented out by at least 3 people who are not from 1 ‘household’ (e.g a family) but share facilities like the bathroom and kitchen”. There are many advantages of an HMO investment but here are our top tips:

The HMO Mortgage and property market:

Like any good investment, you should know what you are doing, the risks, and the costs. Investments tend to go wrong when you rely on advice from the so-called experts you may meet down the pub or over the garden fence! The key is for you to know your market and do your own detailed research. You are then in a position to determine if something is a good investment or not. So like any investment what do you need to know to make that judgment of what is a good or bad investment.

  • Do your research of property prices in the area you are considering.
  • Check for comparable evidence – don’t rely on someone telling you. Is the area you are considering going to provide a tenant who is your target market?
  • Who is your target audience/tenant and are they around in the area you are looking at. Is there the demand for rentals?
  • What type of property is most popular – 3 bed house or a 10 bed house?
  • What is the realistic rent for each room rented – check comparable’s.
  • Are there lots of rental companies in the area – if so this may suggest there is good demand. Likewise if there is not – maybe that could also be telling you something.

When it come to your HMO property business, don’t get personal!

Remember you are not going to be living there so what you like or don’t like is irrelevant.

  • Is there a demand for rentals?
  • Is there a demand for HMO’s
  • What type of HMO’s? Students, professionals, or maybe something else?
  • It is all about price, price, price – the price you pay for it, the rent you get for it and the cost of maintaining that investment which might include management fees, maintenance, void periods.

Want to be a HMO property investor? Get on the ground and do some leg work:

Speak to all the estate agents in your target area and then keep in touch with them regularly. Get them working for you and make sure they know what you are looking for.

Don’t rely on window shopping on the internet, if a good deal comes on, it's likely to have gone before you get to see it.

Negotiate hard on your HMO property investment:

In this climate, there are lots of opportunities to be had. Prices have softened and some people may accept an offer.

The key is to focus on your bottom line, crunch the figures and stick to your target purchase price. If the seller doesn’t want to play ball, move on, someone else will. This is not the time to be personal, it is all about the bottom line.

Also remember you have nothing to sell and can move quickly so use this to your advantage. By not being in a chain avoids delays, complications, and unsuccessful sales. So this is a huge benefit for any prospective seller.

As a HMO property investor, make sure you are realistic:

It's easy to get carried away when it comes to investing. You have money and it's burning a hole in your pocket, you just have to do something with it, right? Wrong...set your aims and objectives and stick to them. Capital preservation is the most important aspect of any investing. If you make the wrong choice and get emotionally carried away it could come back to bite you. It is better to wait until you have found the right buy to let property. So it’s important to be realistic in terms of the rent you are going to achieve.

Realistic with the occupancy levels – don’t base your research assuming you will get 100% occupancy. It's very likely you will have void periods between tenants. If you don’t then great, it's just more money!

Get your HMO Mortgage in order before making an offer:

You would not believe the number of people we come across who have had an offer accepted and yet they have not gone their mortgage in place. There are a couple of major risks here:

  • If you don’t move quickly enough, someone else might sneak in, particularly if it is a good deal.
  • You might not be able to get an HMO mortgage – lending criteria can change so make sure you know you can get one before you offer.
  • Even if you can get an HMO mortgage, the cost might affect the profitability of this investment.

You should know these costs at the very beginning as it is key in your research and knowing your market. 

Once you are committed on your HMO property, move quickly:

I have come across lots of people who think that once their offer has been accepted they can sit back a little bit as the hard work has been done.

They have done their research, found the right property, and negotiated hard for it. Wouldn’t it be a shame for all this hard work to go up in smoke and lose out to someone else who has benefited from your work?

Do you think if the purchasing process starts to drag, the agent won’t contact one of their many contacts to get the property shifted quicker?

It happens all the time and the only way to avoid this is to move quickly and speedily.

It's important your HMO mortgage broker can do this and keep you up to date on developments. Some good mortgage brokers are able to assist with the whole buying process and certainly go the extra mile by not just focusing on the mortgage but the whole deal.

If you have an inquiry please get in touch:

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