A beginner’s Guide to Buy/Sell HMO Property - Property Division (2024)

A multi-family home is a single property, so selling your home requires a special method.

If you are a tenant looking for a home or a property owner, you can sometimes come across the acronym “HMO.” What does it represent?

Well, in this article, we will go into detail about the question, “What is HMO ownership?”

That being said, if you intend tosell HMO Property, we will discuss them as well.

A beginner’s Guide to Buy/Sell HMO Property - Property Division (1)

What is an HMO property?

Let’s solve a big problem: “What are the HMO attributes anyway?”

First, let’s look at the acronym’s meaning: HMO stands for “Multiple Life.” Sounds simple, right? However, many types of accommodations can be considered HMOs. These may include:

  • Hostels
  • Building with lots of beds and several shared bathrooms
  • Shared house
  • Lodges
  • Buildings containing apartments with their own amenities
  • Private residence
  • Reconstructed residential building
  • Staff accommodation

As you can see, the time limit can be very long. A good rule of thumb is that properties occupied by three or more tenants that make up more than one home and share common amenities like bathrooms, toilets, or kitchens can be considered HMOs.

Tips:A family is defined as a member of the family living together or a single person.

What features decide whether or not a property is considered to be an HMO?

For a property to be considered an HMO, it must have four common characteristics. These are:

  • Households are not members of the family
  • Residents must use the property as their sole or primary residence
  • You can only use the apartment for residential purposes.
  • Each of the tenants needs to pay the rent.

These common characteristics apply to each unit, but given the entire converted block, different rules apply.

Unless the municipal government has lodged an HMO, any of the following requirements should be fulfilled for the land to be officially classified as an HMO.

How are HMOs separate from other rental homes?

Local authorities highly regard HMO health and safety standards, so if the tenantliaison officer(TLO) is notified, they can take action against tenant complaints.

The local authority (especially the environmental hygiene department) will listen to the tenants’ complaints and ask the landlord to fix any problem that he considers to be substandard.

It is not uncommon to prosecute non-compliant homeowners. In extreme cases, parliament may even personally take over the management responsibilities of the HMO.

What requirements should be maintained in the HMOs?

As mentioned above, HMO owners must pay attention to health and safety concerns to comply with regulations and avoid local authorities.

If you want to run the HMO, the most important things to remember are:

  • Annual gas safety inspection
  • Electrical safety checks every five years
  • Fire safety – Installing and maintaining smoke and Carbon Monoxide alarms
  • Provide facilities for garbage disposal.
  • Provide and maintain adequate facilities for cooking, cleaning, and washing.
  • Keep public places clean and orderly
  • Management of overpopulation

Do all HMOs require licensing?

In short, no. When an HMO is considered a large HMO, a license is generally required. According to the “Private Leasing” section, the large HMOs are:

  • Buildings of at least three floors
  • Host at least 5 tenants to create more than 1 family
  • Rooms shared with other residents (bathroom, toilet, or kitchen)

If you have questions about whether your property is truly an HMO, please contact your local authority for guidance orcheck this out.

How to Sell HMO Properties?

Follow these simple steps below to give you the best chance of success at the best price.

Consider the HMO Sales Pricing

Different types of HMOs ask for different types of prices.

  • Smaller 3-6 bed HMOs generally determine home prices based on location.
  • Medium 6-9 bed HMOs are typically priced based on income, depending on location.
  • A double bed (9 beds or more) can control the price based on your income.

Consult professional HMO agents or brokers for advice. Seek the advice of a professional HMO agent or HMO mortgage broker to help you resolve your specific situation.

Have your HMO sales records in order quickly

When you sell HMOs, what makes potential HMO buyers confident to bid is a complete set of documents related to HMO ownership that is clear at first glance.

To sell the HMO at the best possible price, obtain the following documents and prepare them from scratch for potential buyers.

  • HMO floor plan
  • Construction certificate
  • HMO planning document
  • Fire alarm certificate
  • HMO license certificate
  • Electrical safety certificate
  • RICS assessment (if applicable)
  • High-resolution marketing photos
  • Rental hours
  • Administration contract

If these file packages are incomplete or only appear at the legal transfer stage, they generally raise more questions, create uncertainty, and reduce the chances of a successful transaction.

Tips:In selling HMO properties, the most transparency leads to the highest price and the fastest speed.

Picking the Right HMO Agent to Help Sell Your HMO

The HMO selling process needs to pick an agent who completely knows the HMO from beginning to end.

In terms of funding, controlling, preparation, enforcement, and activities, HMO assets are dynamic. To confidently speak to potential buyers about HMO real estate, any agent must fully understand everything about HMO.

Tips:Choose an HMO expert or at least determine their understanding of HMO. Local real estate agents can be great, but the HMO sales success rate is much lower than that of professional HMO sales agents.

Selecting the Right HMO Buyer

It is necessary to ensure they are thoroughly eligible to purchase the property while attempting to buy/sell HMOs by choosing HMO buyers.

HMO real estate buyers with the appropriate financial qualifications from an HMO who understand an HMO’s complexities and enter into actual deals are the preferred method of maximizing sales transaction opportunities.

Questions for potential buyers:

  • Do you currently have an HMO?
  • Do you handle yourself or use an agent?
  • Which HMO lender will you use to get the mortgage?

These questions will help indicate the suitability and willingness of potential buyers to make a purchase.

Always verify that the buyer has sufficient HMO financing with cash or a professional HMO guarantee.

Uneducated HMO buyers generally offer more money to buy HMO properties. Still, the odds of getting a deal are 50% lower, so it is best to understand this early.

Tips:Always ask for proof of payment and essentially the decision before accepting any offer.

Set the HMO Sales Transaction Expectations

HMO purchases do not surpass 8 weeks, and most last 4 weeks with appropriate management and planning.

Once you have chosen the best buyer, set your transaction expectations right away, including terms of sale and key deadlines. If the buyer rejects the expectations or terms, it may be necessary to renegotiate or find another buyer.

Recommended time interval

Assessment instruction deadline-Assuming the decision is made in principle, within the agreed time limit of 48 hours

Real estate appraisal deadline-Within 14 days of receipt of appraisal instruction. If the lender they choose is slow or assisted, consider offering the property to other buyers.

The defender indicates the date-Within 48 hours after consent to the sale is granted. To avoid delays, the seller’sattorneyshould sign the contract as soon as possible.

Some buyers’ attorneys will not begin legal work until the listing is restored. Still, to improve efficiency, we recommend that you complete legal work immediately.

Tips:Use a sales progress company. They usually cost around £250 and can only be paid for when the property is negotiated.

They maintain communication between the parties, generally reducing the time required to sell the property by an average of two weeks and increasing the probability of successful real estate transactions by approximately 50%.

Manage the HMO Valuation

Valuation is a frequent point of discussion when selling HMOs, so prepare the property and documents in advance.

All documents are printed and ready to deliver. The appraiser may not need everything. Give them what they are looking for, pure and simple.

A day before the valuation

  • Inform tenants that you will enter the residence.
  • Make sure your property has undergone the necessary maintenance.
  • Present a clean and transparent plan before the quote to show the property in the best condition.

On the valuation day

  • Arrive early at the hotel.
  • Remind all tenants that access rights are required.
  • Remove all excess garbage / sundries / bikes / clothing.
  • Say hello to the appraiser and relax.
  • Maintain good communication until replacement/completion.

HMO property sales are more complicated than simple apartment sales, so you should pay more attention to completion and gradual completion.

Check this out if you have not reviewed thenew HMO rulesfor homeowners.

Tips:From appraisal instructions to completion, good communication between the parties will ensure the best opportunity for a successful real estate transaction through an HMO.

Conclusion

It is necessary to take into account the price and the situation of the buyer/seller.

Inexperienced buyers/sellers can bid the highest bid, so it seems like a good option. However, the risk of the transaction failing is higher due to the inability to raise funds or complete the transaction.

Smart buyers and cash-for-cash buyers may offer more realistic prices but are more likely to complete the deal faster.

A beginner’s Guide to Buy/Sell HMO Property - Property Division (2024)

FAQs

What does HMO mean when selling? ›

A House in Multiple Occupation (HMO) is a rental asset, similar to a conventional buy-to-let, but with several differences that impact mortgage financing and property management.

What is the best yield for an HMO? ›

According to the BLA, HMOs can yield an average return of over 7.5%, significantly higher than the modest 3.63% typically seen in traditional buy-to-let investments.

What does HMO in property investing stand for? ›

First, let's look at what the initialism stands for: HMO means House in Multiple Occupation. Sounds straightforward enough, right? However, many types of accommodation could be deemed an HMO. These may include, but are not limited to: Hostels.

How do I get around my HMO license? ›

How To Avoid HMO Licence
  1. Avoid letting to three or more unrelated tenants. ...
  2. Keep the property within the prescribed maximum occupancy. ...
  3. Avoid letting to students. ...
  4. Use a managing agent or rent to a single tenant. ...
  5. Keep the property in good condition.

What are the 3 basic types of HMO? ›

There are four types of HMOs: staff model, group model, network model, and independent practice association. HMOs offer excellent services but mostly for in-network options. HMOs are on par with deductibles and copayments compared to other types of insurance.

What are two disadvantages of HMO? ›

Disadvantages
  • If you need specialized care, you will need a referral from your primary care physician to an in-network provider.
  • Must see in-network providers for care-less flexibility than a PPO plan.

Why is an HMO so much cheaper? ›

Many HMO providers are paid on a per-member basis, regardless of the number of times they see a member. This makes HMO plans a more economical choice than PPOs. An HMO generally only covers care received from the plan's contracted providers, known as “in-network” providers.

What is the normal range for HMO? ›

Mature human milk contains from 5 to 20 g HMOs/L, which often exceed concentrations of protein (2–7); concentrations are even higher in colostrum (2, 8).

Does HMO save money? ›

Lower cost

Because of the agreed-upon payment level, an HMO usually offers lower monthly premiums than other types of insurance plans. They also tend to have lower copays and coinsurance, which helps make them more affordable.

What are the pros and cons of HMO? ›

HMOs are usually more affordable than preferred provider organization (PPO) plans, but they offer patients less flexibility. HMO participants must choose a primary care provider (PCP) to coordinate their care. They must see only in-network providers; if not, they'll have to pay for those visits entirely out of pocket.

What is an example of a HMO property? ›

A house in multiple occupation ( HMO ) is a property rented out by at least 3 people who are not from 1 'household' (for example a family) but share facilities like the bathroom and kitchen. It's sometimes called a 'house share'.

What is one advantage to HMOs? ›

Advantages of HMO plans

Lower monthly premiums and generally lower out-of-pocket costs. Generally lower out-of-pocket costs for prescriptions. Claims won't have to be filed as often since medical care you receive is typically in-network.

Do I need a HMO Licence for 3 tenants Scotland? ›

A landlord who permits their property to be occupied by three or more persons who are not related to one another must obtain a HMO license. It is a criminal offence to operate a HMO without a license and the maximum penalty upon conviction for doing so is a fine of £50,000.

What is an HMO vs POS? ›

HMOs will not cover out of network care. With a POS, or point-of-service plan, you also have one PCP who manages your access to other doctors. However, you can visit doctors out of network but it will cost more.

What does HMO and POS mean? ›

An HMO POS plan is a Health Maintenance Organization (HMO) plan with added Point of Service (POS) benefits. These added benefits give you more flexibility when you need care. Under the HMO benefits of the plan, you have access to certain doctors and hospitals, called your HMO provider network.

Why is HMO so cheap? ›

Also known as capitated or prepaid insurance, was designed to provide members with basic care at the lowest rate. Participating providers receive a monthly capitation check for patients assigned to the office. This amount is only a few dollars and is intended to offset the administrative costs.

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