Written by Lewis Ridley
Updated over a week ago
If you’re a property investor, you’ll be looking for ways to make the most profit from your investments, and one way to achieve that is by converting an existing home into an HMO.
This way, you can profit off each room in the property and dramatically increase the properties monthly cashflow. However, converting can be a pain if you don’t know the process.
To help you out, this guide will provide insight into how you can go about converting a standard family home into a profitable multi-let.
The first thing you need to do is check if the property you’re going to convert is suitable for an HMO conversion. There are a lot of laws and legislation surrounding HMOs, so you can’t just go ahead and convert one without consulting the rule book.
After all, you are changing the class of a property from whatever it is now to a C4 Class (House of Multiple Occupation).
Firstly, you can only create an HMO if there are three rooms to fill in the house. You can’t have a two-bed HMO – you won’t get a licence (which we’ll discuss later).
Secondly, the property will need to meet the demand for a HMO. By this, I mean you need to be converting a property that someone would actually want as an HMO. You don’t want to convert a remote barn house into a HMO as you won’t find any tenants.
Pick a property that has `HMO potential` This could be an old, rundown building or a large Georgian townhouse.
Additionally, if you can pick something the council will be happy to approve, you’re also in for winner. As you’ll see later, the council do have a say in what you can convert.
If you think the property is suitable for an HMO conversion, hold on to your hammer for second – you still need to get in touch with the council for approval.
While there may be some areas/council where HMO conversion comes under “permitted development” (aka, no need for planning permission), other areas are governed by what is called Article 4. This essentially means you’ll have to apply for planning permission before the change in use can move forward.
Additionally, you’ll also need planning permission if the HMO is going to hold 6 or more individuals, regardless of whether it falls within an Article 4 area.
Not a lot of people know about certificates of lawfulness, but they’re important to note if Article 4 is involved. You can also apply for these if no Article 4 exists, which is recommended.
This is a form of documentation issued by the council that allows you to convert a property into an HMO within permitted development guidelines.
Interestingly, these apply to both new HMOs and existing HMOs. You’ll need to get a retrospective change of use application filed if Article 4 comes into play, even if you’ve been renting for a while.
These can be expensive as well:
• For existing HMOs, the price is around £450 for an application • For proposed HMO conversions, the price is around £100
These prices are layered on top of planning permission by the way.
In either case, it is important to get an application of lawful development (LDC) as soon as possible. It acts as insurance that you have the right to convert the property and run it as an HMO.
You’ll also need to ask about licensing. The convert an HMO you will also need an HMO license. This will have to be issued by the council governing the area.
HMO licensing is complicated. It differs from council-to-council. There two types you need to be aware of:
• Selective licensing: a form a license that only gets issued to 3-4 person HMOs. Only a few councils apply this, so make sure to ask. • Mandatory licensing: a form of license that applies to any HMO with 5 or more individuals living in it. This is a standard practise across the UK. So, if you are planning on having more than 5 rooms, you’ll need a license.
HMO licensing will also include fire safety and other specifications. These can vary widely between councils, so always call up and ask what they look for in an HMO.
Failing to license an HMO can result in a fine, known as HMO infraction. This fine ranges between £2,000 and £3,000.
Once you’ve done your due diligence with both the property and the council’s regulations (and been given the green light), it’s time to get converting.
If you haven’t already, get a good team together. This will include reliable building contractors and an HMO architect if you think you need one.
Make sure to get a solid plan together and know your deadlines. It is not uncommon for building works to run over their timeline.
There are a few specifics you need to be aware of when converting an HMO. There are certain fire, gas, and electric regulations that need passing. You need to make sure these are included in your conversion plan and make your team aware of them.
Common regulations you need to follow include:
• Fire safety: HMOs need smoke and carbon monoxide alarms in every room as well as fire doors. • Gas safety: You’ll need to submit a gas safety certificate to the council. • Electrical safety: An annual electrical safety certificate for all appliances needs to be performed and stored securely.
There are also room sizes you need to abide by when converting your HMO. They are as follows:
• For a room sleeping one individual over the age of 10, it must be 6.51 metres squared • For a room sleeping two individuals over the age of 10, it must be 10.22 metres squared • For a room sleeping a child under the age of 10, it must be 4.64 metres squared
Make sure your building team follow these guidelines and you should be fine!
As well getting the location, legalities, and everything else right, it’s important to know a few insider tips when it comes to converting an HMO.
You don’t need to look for ready-made 4-5 bed homes when you’re scouting for an HMO opportunity. You can covert reception rooms into bedrooms easily.
How? Strip them back and add a bed. That’s it.
You can turn all the reception rooms in a house into bedrooms if you want. However, be aware communal areas are important in HMOs. So, if you’re going to do this, make sure there is ample space in the kitchen for socialising.
The kitchen and bathroom are essential elements in any house. They’re even more important for HMOs.
These individuals are going to be sharing these spaces. So, making sure they’re well-equipped and clean is a must.
If you want to have an HMO that rents quickly, you need to give yourself a competitive advantage. You can do this by kitting out your HMO with modern furnishings and equipment.
Trust me, tenants will be more favourable to an HMO and landlord who takes care of them by providing them with everything you need.
You don’t want to have the reputation of providing the old, second-hand Ikea sofa and broken appliances.
That’s all you really need to know about HMO conversions. The most complicated part is getting council approval. With the problems HMOs deliver in certain areas, councils aren’t always a fan of them.
With the tips and steps above, you should have an easier time navigating your HMO conversion.
For more tips and advice on property and HMOs, see our knowledge centre for more.