HMO Development Funding
An HMO can provide a more profitable return than standard rental properties but are also attractive to tenants for whom they can offer affordable accommodation. Experienced landlords have found that using specialist HMO development funding can help significantly increase their yields.
What is an HMO?
Each property development will be classified as a Home of Multiple Occupation (HMO) if at least three tenants live in the property and form more than one household and they share a toilet, bathroom or kitchen facilities with other tenants.
For each HMO you operate you may require a licence which are issued by the local authority and valid for five years. From 1st October 2018, mandatory licencing of HMO’s was changed and The Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order 2018 will replace the 2006 order of the same name.
An HMO can provide a more profitable return than standard rental properties but are also attractive to tenants for whom they can offer affordable accommodation
A development is a large HMO if both of the following criteria apply:
- At least five tenants live in the property forming more than one household
- The occupants share a toilet, bathroom or kitchen facilities with other tenants
The government defines a household as either a single person or members of the same family who live together. Such family members include people who are:
- Married or living together, including people in same-sex relationships
- Relatives and/or half relatives, for example grandparents, uncles, aunts or siblings
- Step parents and step children
You can find some interesting information on HMO’s here.
If you are looking for HMO development funding then there are banks that will offer finance for licenced developments. The range of banks will vary according to the size of development with more then five bedrooms perhaps requiring a specialist lender.
You may require HMO development funding if you are considering:
- Renovating an existing HMO
- Purchase and new build of an HMO
- Conversion of an owned property into an HMO
Finding HMO development funding can be relatively straight forward but you will need to have detailed information ready for the lender. Each specialist lender for HMO development funding will have their qualifying criteria and preferences such as the number of bedrooms and will have their own approach to valuation.
Developer Money Market allows property developers to compare property development finance lenders for a range of property development related loans including senior, stretched senior, mezzanine and bridging.