Scotland’s capital city has a large, vibrant student population which means there’s always a high demand for Houses in Multiple Occupation (HMOs). These properties, rented out to three or more tenants who are not part of the same family, offer an attractive investment opportunity for landlords.

With six universities and numerous colleges, the influx of students to Edinburgh every academic year creates a consistent need for affordable shared housing. Changes to the law regarding short-term letting means many landlords are looking for alternatives for their properties that can generate a similar income, but setting up an HMO comes with its own set of legal requirements and practical considerations.

Pros Of HMOs
One of the main advantages of renting out a property as an HMO is the increased rental income. By renting 3 or more-bedroom properties to larger groups, landlords can generate higher overall rental income compared to letting the property to a single tenant.

Cons Of HMOs
While the financial benefits may be greater, the practical side of managing an HMO can be challenging. Having multiple tenants may mean more wear and tear on the property, increased maintenance, and potentially more issues to resolve.

Renting to multiple tenants can make things more complicated – if one tenant leaves, the landlord needs to find a replacement to move in or lose valuable rental income.

Students may be less likely to take care of the property as well as long-term tenants who want to make it their home for the longer term.

Students may only rent the property for 9-10 months of the year while they are studying, which means landlords miss out on a couple of months of income. However, this is less often the case in recent years – many now stay all year round to secure the property throughout their course.

There are stringent legal requirements to meet that exceed those for a property rented to a single tenant, including applying for an HMO licence. These can increase upfront costs and involve ongoing compliance.

Applying For An HMO Licence
In Edinburgh, landlords must obtain an HMO licence from the City of Edinburgh Council. The application process requires landlords to demonstrate that the property meets specific safety standards, including fire risk assessments, fire extinguisher checks, emergency lighting certificates and fire doors. Electrical and gas safety certificates must also be provided.

Applications can be made online on the Edinburgh City Council website. Licence fees are based on the number of tenants. New licences are granted for one year and thereafter on a three-year basis unless there has been a breach, such as not renewing a safety certificate on time.

Compliance And Inspections
Once the application is submitted, an inspection will be conducted to ensure the property meets the required standards. If the property passes, the HMO licence will be granted. First-time landlords will only be granted a one-year licence, and landlords must renew the licence before it expires and maintain compliance with all regulations to avoid fines or legal action.

Property Requirements
To set up an HMO, the property must meet specific criteria that have additional requirements to those required for a regular tenancy. This includes providing adequate kitchen and bathroom facilities, installing fire doors and ensuring all rooms are of a suitable size. Landlords may need to make significant modifications to meet these standards, which can involve substantial investment.

Management And Maintenance
Managing an HMO can be time-consuming, much more so than managing single tenants, so it’s worth considering a property management service – especially if you own multiple HMOs or live far from the property. Regular maintenance and prompt repairs are essential to keep the property in good condition and comply with safety regulations.

Setting up an HMO in Edinburgh can offer higher rental income and a steady flow of tenants from the city’s student population. However, landlords must be prepared to navigate the legal complexities and management challenges that come with HMOs.

Ensuring compliance with regulations, maintaining the property to a high standard, and effectively managing multiple tenants simultaneously are all crucial for success in this market.

At Clan Gordon, we have been taking the hassle out of managing HMOs for Edinburgh landlords for almost 20 years and know all the benefits and pitfalls. To find out more, schedule a call with one of our Business Development Managers.