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Together

New rules for HMO landlords from October

The buy-to-let market has undoubtedly undergone a huge raft of changes over the past few years.

We’ve seen an evolution in the way property investment is taxed and the way loans are underwritten, leading to landlords adjusting their portfolios. Some smaller landlords are even quitting the market - leaving opportunities for the more professional buy-to-let investors to increase the size of their portfolios.

However, a new change is on the horizon for these professional landlords investing in Houses of Multiple Occupation (HMOs) in England. From October 1, their properties will need to meet new minimum standards, in a bid to beat overcrowding and to make sure homes meet acceptable standards.

The first major change applies to bedroom sizes. Double bedrooms must be at least 10.22m2 in area, with single rooms at least 6.51m2. For children under the age of 10, a single bedroom must be at least 4.64m2 in area and rooms smaller than 4.64m2 must not be used as sleeping accommodation.

Under the new legislation the definition of an HMO is changing, and more landlords will need HMO licences, so that local authorities can more closely monitor the number of these types of properties in their area, to assess local housing and transport needs.

Previously, a licence was only mandatory if a HMO was occupied by five or more people, from two or more family units, and was spread over three or more storeys. Now, landlords in England and Wales will need a licence for anysuch household, no matter how many storeys.

Purpose-built flats, conversions, bungalows and large two-storey homes will all have to meet the new definition, and it’s estimated that the number of properties requiring a licence will almost quadruple. Student and graduate properties are also likely to require an HMO licence in the future.

However, HMOs can still attract the highest rental yields of any buy-to-let properties, according to a study by market researchers BDRC published in April. In the first quarter of this year the average rental yield for HMOs stood at 7.1%, compared to 5.8% overall for the buy-to-let market, so there are opportunities out there for landlords willing to put in the legwork.

Luckily, specialist lenders like Together have years of expertise in providing finance for more unusual purchases, such as HMOs and semi-commercial property, and can help investors whether they are looking to buy their first properties or expand their exiting portfolios.

For a comprehensive guide for buy-to-let investors, visit Together’s landlord hub at https://togethermoney.com/commercial-lending/buy-to-let/landlord-hub/

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