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Buy-to-let vs house of multiple occupancy (HMO) Finance

Either getting started or growing your portfolio of homes within the property sector can be confusing, and at times mistakes are easily made. Below is a quick outline of what to think about when decided between a buy-to-let property or a house of multiple occupancy, (often referred to as an HMO) when adding to your property portfolio.


Buy to let property usually consists of either one person, a couple or a family. When looking at buy to let properties they are usually two-bedrooms or more and most of them have a garden, if not a rear yard. Or a one, two-bedroom flat built as part of an urban property development. Generally, these require less maintenance, less involvement, and a simpler investment then HMO’s. However, the return and yield tends to be lower when compared to HMOs.

House of multiple occupancy (HMO)

HMOs properties are comprised of multiple tenants who typically have their own room with shared living spaces such as a kitchen and a living room. Gardens and outdoor space are less important for HMO properties. HMO’s are quite often associated with students or single working professionals.

The return on HMOs is usually quite good and above that of buy-to-let properties. However, the standards for HMO properties are more rigorous under The Management of House in Multiple Occupation (England) Regulations 2006 (SI 2006 No. 372) including safety measures, having gas and electricity supply regularly inspected and maintaining water supply and drainage to mention a few. To see the full list click on the link above.

Rules and regulations for HMOs

For HMOs floor spacing is a big consideration to ensure you get the license you need. If the floor spacing is not adequate it will not be classed as a room which can lead to issues with planning and finance options. The minimum room sizes came into effect in 2018 and full details can be found at the following link:

Buy-to-let or HMO finance?

To understand what type of finance you need for the property you want to purchase, always begin by speaking to a specialist property financial advisor or broker. They can have a detailed fact-finding discussion with you, to discover more about what you are looking to do and explain all of the options available to you.

To help the financial advisor or broker it is usually a good idea to take your plans to any meetings and share details on the scheme that you are looking to carry out. All of this information is useful to ensure you get the right finance criteria.

How much can you apply for?

For buy-to-let properties there are still some lenders that will give a 75/80% LTV ratio but these largely attract a higher interest rate. Most lenders offer a 50/60% LTV ratio which has a better interest rate and a better rental income rate. For HMOs lenders may ask for a valuation based on commercial valuation but these are usually difficult to obtain. Instead you a lender is likely to offer 70/75% LTV ratio on HMO properties.

J&J Commercial Finance is based in Rotherham but serves businesses across the UK with access to over 300 lenders and private banks. For more great advice head to our FAQs, or to find out who we have worked with previously see our case studies. If you want to know how we can help you send us a message or call us on 07399 660 002.