New rules to hit HMO investors

Buy-to-let investors have had to navigate a great deal of change over the past few years.

There’s been something of an evolution in the way property investment is taxed and loans underwritten, leading to landlords adjusting their portfolios. 

In October, there will be yet more changes. Professional landlords investing in houses of multiple occupation (HMOs) in England will need their properties to meet new minimum levels to make sure homes meet acceptable standards and to beat overcrowding.

Under the new regulations, double bedrooms must be at least 10.22m2, with single rooms at least 6.51m2. If the room is a single for a child under the age of 10, it must be at least 4.64m2, while rooms smaller than 4.64m2 cannot be used as sleeping accommodation.

The new rules will also see the definition of an HMO changing, with more landlords needing HMO licences.

Currently, an HMO licence is only needed if the building is occupied by five or more people, from two or more family units and spread over three or more storeys. From 1st October smaller properties in many cases will also require a licence.

However, we still expect HMOs to prove popular among brokers’ investor clients. They can still attract higher yields than other types of buy-to-let properties, according to a study by market researchers BDRC. Analysis in Q1 2018 revealed the average rental yield for HMOs was 7.1%, compared with 5.8% overall for the buy-to-let market, so there are opportunities out there for landlords who are willing to put in the effort.

There are many specialist lenders, such as Together, who have the experience and knowledge in providing finance for clients buying more unusual purchases, such as HMOs and semi-commercial property, whether they are buying their first buy-to-let property or growing existing portfolios.

For a comprehensive guide for buy-to-let investors, visit Together’s landlord hub.

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