How to convert a property into a HMO

Many landlords state that HMO’s are one of the most efficient methods of letting a property portfolio. They can certainly aid gaining higher rental figures from individual properties, but what do you need to consider before undertaking such a task?

By converting a standard property into a HMO, it means that more tenants are paying a combined greater rental figure. They prove desirable to many who are looking for the opportunity to live with others, working professionals are after a cheaper and secure roof over their head whilst they dedicate their time to their career ladder, or students.

With the rental market continuing to grow across the North West, HMO’s are increasingly becoming a viable option for landlords.

If you’re considering the avenue of HMO conversion with one of your properties, there are a number of steps that you’ll need to take; from meeting legal requirements to making the property habitable for more people.

NOTE – Please take a look at our service pages if you are looking for help with your HMO management in Manchester or general property management in Manchester.

Before starting:

The first and major stepping stone to letting a HMO is to obtain a HMO license. Regulations for HMO’s have changed in recent months, increasing the requirement for over 750,000 properties across the country to have one. Checking with your local authority or getting in touch with us are ideal first steps to navigating this process.

In order to comply, you’ll need to make sure that a valid gas safety certificate is sent to the council each year, while smoke alarms need to be installed and safety certificates for electrical appliances must be available on request. Different authorities may add additional criteria, so there may be other things you need to consider in order to comply.

Depending on how much work needs to be done to the property to convert it, you may also need planning permission to be able to make certain changes. When carrying out such a conversion, it’s always wise to make sure you keep a record of all correspondence, applications and approvals to ensure you’re covered in the future.

Property conversion practicalities

Firstly, you’ll need to consider what your tenants are going to need and how much space they’re going to require. It’s also important to think about what level of furniture and appliances you’ll be providing.

Students tend to be happy with basic living spaces as the competition for student lets continues to grow year on year. If you’re looking to source working professionals, keeping a clean and modern look is crucial. Some landlords elect to go for quirky themes that are rolled out across their HMO’s to stand out from the competition. It all comes down to your budget and who you want to occupy it.

Within five years of converting to an HMO, all rental properties will be visited by the council, who’ll carry out a Housing Health and Safety Rating System risk assessment. If any unacceptable risks are found during the assessment, they must be addressed. With this in mind, you need to make sure your HMO is habitable and provides enough space for tenants to live comfortably.

It’s likely you’ll be converting the use of some rooms. For example, spare rooms may be converted to additional bathrooms and reception rooms to additional bedrooms.

Moving or constructing additional walls may be required to alter room sizes – these are all aspects you’ll need to plan carefully before undertaking. It’s advisable to use a professional when working on the more significant parts of the conversion.

Some landlords convert garages in order to create additional space. These often require planning permission, so you’ll need to check with your local authority.

In many circumstances, traditional Victorian terraced houses could be ideal for HMO conversion, due to their spaciousness and the size of the reception rooms. For example, in a three-bedroom terraced house a landlord could convert one reception room and the loft into bedrooms to turn it into a five-bedroom HMO.

Converting reception rooms is often essential, but not always the right decision. In the perfect scenario, the property will have two reception rooms – one of which can be converted, leaving the other room to remain as a dining or living space. Tenants can sometimes be put off properties with no living room or reception space, so it’s something you’ll need to consider carefully.

Depending on the property, converting it into an HMO is going to be expensive and take some time. You need to make sure you budget properly and don’t expect instant financial returns.

Other considerations:

One of the key differences between an HMO and a standard rental property is that you may encounter a higher turnover of tenants. Therefore, it’s advisable to put aside at least two months’ worth of rent each year to cover potential void periods. Look at having an active advertising strategy in place to keep the voids minimal; one that Abode deploys for all our managed HMO’s.

Another crucial factor to remember is that, due to the nature of having more tenants, the property’s likely to come under more stress over the course of a tenancy. Bathrooms, kitchens, floors and doors will all take a lot more wear and so you need to make sure you’re ready for this and are prepared to respond to all reasonable repair requests with speed and efficiency – as with any other tenancy.

It’s wise to prepare the property fully before letting it, taking no shortcuts and making sure you have enough money put aside to cover maintenance costs during and after the tenancy.

Converting a rental property to an HMO can be an effective investment, but it does require more work and upkeep. Therefore, before jumping straight in, you’ll need to do your research, take your time and carefully compare the additional work and expense against the additional profit you’re likely to make.

If you’re looking to venture into HMO letting or management and want to ensure you and your property tick all your boxes, give us a call for free advice and rental valuations: 0161 883 2525.

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