Considering buying a HMO

[Grampa]

I am considering buying a 7 room HMO. (i can hear the sharp intake of breath from you all) I have seen for sale.

I have always steered away from HMO'S both for my business and personal portfolio mainly because it is a completely  different market, highly regulated and very labour intensive but the returns are very good. If my calculations are correct I am looking at a yield of 11% AFTER all the overheads (including mortgage interest and budget for repairs etc etc). calculated in which are a lot. 

If I go ahead I am going in with a very sensible family member who husband would do the maintenance and running around.The wear and tear can be a lot higher.

I would pay all the utilities and add a premium to the monthly rent.

Has any one had experience of running a HMO and have any tips or advice.   

 

[Richlist]

Like you I have always given them a wide berth. For me, I think this is mainly to do with the following......

* The building regs associated with HMO's are long and detailed which in my book means expensive both to install, repair /maintain & replace.

* The need for HMO registration, inspection, local authority involvement and the vast list of legal requirements owners and landlords have to  meet.

* As someone with a low pain threshold, the types of tenants attracted to HMO's and their need for hands on management and all of the potential problems/ issues that goes with that, puts me off.

* HMO's can be a big problem for neighbours. I am reasonably thick skinned but just wouldn't want the hassle.

That having all been said, I am probably misinformed on some of my prejudices, nevertheless those that run HMO's provide a fine services for some in the community.

Good luck with the venture.

 

[Grampa]

The property in question is already licenced so all the requirement  such as fire alarms, fire doors etc etc are in place and appears to be a pretty much a empty turn key investment. I'm still doing a lot of research though.

I phoned around a few other agents in the area and not one deal with HMO's which confirms how specialized this area of lettings is. But there is a market for it. 

Housing benefit tenants appear to be ruled out because they only get shared room allowance which wont cover the rent and I am not going to chase a load of short fall payments each month.

One bed flats in the area demand about £550+ pcm plus all the usual bills I am looking at about 450-475pcm all inclusive including internet. and although they will have to share a large kitchen i would fit a snack station in each room to include microwave, kettle and small fridge which helps with desirability and reduces bickering over food in one big communal fridge. (pat testing included in overheads) 

I am also going to do the number crunching to have a plan B in place so if it doesnt work out or I get fed up with it after a few years maybe i could convert into 3-4 flats.

 

Of course another option is to offer it as a half way to the local council to house migrants at a ridiculous high rate.  Though it may upset the neighbors but I will be in my villa in Spain next to you RL so it wont matter. .   

 

 

 

 

   

[Melboy]

I am mainly in support of what RL has said Grampa.  

[ohdearme]

Hello Grampa

Camden have slapped a huge list of works to do on an HMO I look after. Tenants will be disrupted, stay well clear

Alan

 

[bil8999]

Hi to all

Looked at several HMO's for other people, decided not to get involved, heard 9 months later big problems with tenants, not worth the hassle.   

 

[Grampa]

I do like a challenge but the jury is still out. Lots of mulling going on.

If I do go ahead I may keep a running commentary on this site or do a blog.

[Mortitia]

Let the Housing Act 2004 be your new bedtime reading Grampa - it is all in there.  I have a lot of HMOs on my patch - don't forget an HMO can be only 3 unrelated persons living in the same premises but mandatory licensing on applies to the larger more complicated properties .  In my area that is 3 floors and 5 or more persons.

The new thing coming in will be landlords having to pay for a licence to let HMOs and figures of £1,200-£2,000pa are being bandied about.  Can't see some of the rogues paying this up myself. 

Never say never  - as properties get more expensive this could be the way to go.  Personally I'm making it doing Airbnb -  can't keep up with the demand!

[Grampa]

Thanks for that Mortitia but isn't there a cost for getting a licence (no idea how much that is thought) already or is that something else?

 

[ohdearme]

Some years ago, I had to pay about £500 for registration and a couple of years later about £700.00 for licencing, (if my memory serves me well)

The  trouble is I think that the Councils have more power over what happens to the house than the owner.

[Grampa]

thanks for that ohdearme

[Richlist]

That may be true BUT registration, licencing, inspections and planning permissions are all designed to ensure health, safety, acceptable living conditions, minimal impact on the neighbourhood and elimination of unscrupulous landlords who would otherwise exploit the situation. To ensure that all happens, it does unfortunately, come at a cost which has to be born by someone.

I'd much prefer that to be the landlord than the council tax payer or the general tax payer.

So, no objections on my part.......let's all work towards a safe living environment for everyone.

 

 

[bil8999]

12 hours ago, Richlist said:

That may be true BUT registration, licencing, inspections and planning permissions are all designed to ensure health, safety, acceptable living conditions, minimal impact on the neighbourhood and elimination of unscrupulous landlords who would otherwise exploit the situation. To ensure that all happens, it does unfortunately, come at a cost which has to be born by someone.

I'd much prefer that to be the landlord than the council tax payer or the general tax payer.

So, no objections on my part.......let's all work towards a safe living environment for everyone.

 

 

Yes I agree, after all it is a business

 

[Mortitia]

On 27/09/2016 at 9:49 PM, Grampa said:

 

Thanks for that Mortitia but isn't there a cost for getting a licence (no idea how much that is thought) already or is that something else?

 

Get in touch with your local housing officer at the council and ask what their plans are.  Each council sets their own fee.  In Wales compulsory legislation requires all landlords to register and pay a fee.  Currently only 17% have - it has to be done by last day October 2016. 

In my area a licensing fee is due to be set but no one knows what it will be - we are guessing the £1200 - £2000 I already quoted.  Rents are higher here so maybe that is fair but it is a big chunk out of your HMO income.  Maybe we have had it too good for too long?

[Grampa]

6 hours ago, Mortitia said:

Get in touch with your local housing officer at the council and ask what their plans are.  Each council sets their own fee.  In Wales compulsory legislation requires all landlords to register and pay a fee.  Currently only 17% have - it has to be done by last day October 2016. 

In my area a licensing fee is due to be set but no one knows what it will be - we are guessing the £1200 - £2000 I already quoted.  Rents are higher here so maybe that is fair but it is a big chunk out of your HMO income.  Maybe we have had it too good for too long?

Methinks I have some more number crunching to do.