Is Your Council Trying To Enforce HMO Regulations On You?

By Matthew Moody | HMO Regulations

Seems like councils are cracking down everywhere on “rogue” landlords.

Day after day, I get alerts of this council and that council “cracking down” on the landlord community.

Whilst I applaud and uphold the need to meet health and safety standards, it does seem that HMO landlords appear to be getting a bad name from a few rogues who cannot be bothered to implement the required regulations.

My top tips for meeting the required regulations are:

• ensure that what is being asked of you is fair and still valid (ie there is no need for washhand basins in every bedroom now; this was revoked last October)
• ensure that you get at least three quotes for work that needs doing – and in the case of electricians, make sure they have NIEC or Part P qualifications
• if cashflow is an issue, work with the council and fire departments to schedule the work in a timely manner that meets the immediate urgent requirements but allows you enough time to find the funds for all the work (after all, most landlords don’t have a spare £5,000 available to just put in a fire alarm system, fire doors and the like)
• be reasonable, work with the councils and fire departments and you will find that they are just people doing their jobs and relationships developed now will serve you well in the future

I would always recommend speaking to the local housing team or HMO officers before you buy in an area to make sure you understand what is happening, what their expectations are and to start putting names to faces as soon as possible.

That way, its not going to be you that the councils are cracking down on.

Is now a good time to get into property investing?

By Matthew Moody | Property Investing

This is a question that was posed to me only the other day by a novice investor and it is not an easy answer.  I then read an article in one of the nationals which drove me to writing a response.

Lets look at the facts where we stand right now:

• House prices have dipped year-on-year and are continuing to slide in most areas by between 1 to 2% per month according to latest land registry statistics
• Buy to let mortgages are at an all-time low of less than 500 products – and these seem to be diminishing daily
• Confidence in the general economy, financial markets and world trade is low – and driven by media doom and gloom is rapidly vanishing as the media drive us into a recession (whether we wish to be in one or not)
• the credit crunch as its called has impacted the property markets due to liquidity issues impacting the ability for property investors to buy houses

However, lets step back and look at property investing for what it really is: a long-term investment designed to build month-on-month cashflow and capital appreciation through rising equity in the property.

The general rule of thumb often touted is that property doubles every 7.2 to 8 years; whether we will see this happening after recent events is difficult to say but even if it takes 10 or even 20 years for the value of a property to double; it will double in price for certain.

Why do I say this?  Simple; the burden on new housing is so immense yet so maligned and ignored that it beggers belief.  With the rising tide in immigrant workers, contract workers, divorcees, extended families and social patterns changing; there has never been as much demand for housing.  With the failure of the national housebuilders to even match demand and now with a widespread halt on all building; it will be virtually impossible for the housebuilders to keep up with demand; even if modern construction methods and materials are used, they are still at the beck and whim of the local planning departments who don’t have the same sense of urgency in pushing planning applications through.

So, is it the right time to get into property investing?

Well, lets look at what you can expect if you decided to get into property investing now.

1. There have never been so many bargains available.  Whether its repossessions, developers off-loading stock, distressed and motivated sellers; there is a bargain around every corner.  In this market, we’ve seen discounts of up to 50% off houses and average discounts of 25%-30% are not uncommon.  So, even for a novice investor, I would argue that its possible to get into property for less money than you may have needed last year as the discounts are larger.
2. There are mortgages available for cash-positive deals.  I know a lot of property investors have invested in off-plan apartments, sale and rent backs and low-yield deals across the country in exchange for equity in a property.  Whilst I’m not saying from a general equity growth perspective that this strategy may work; its not something I would recommend in the current climate.  You need to get the best possible cashflow out of any property you buy – as a minimum I would aim for £100 minimum before any additional bills kick in.  If you want true cashflow, then invest in HMO’s; to start, then go here and view this article http://yourhmoexpert.com/hmos/what-is-a-hmo-house-of-multiple-occupancy/
3. Those who  build their portfolios carefully in this market will be the wealthy property investors of the future.  Say that property does drop by 20-30% and you are buying at 20-30% discount to the market value.  Your equity is already locked in and then when house prices start to rise again, your net worth will begin to increase exponentially.  Its often said that you only need £1,000,000 worth of property to live comfortably off (and I’ll cover the economics and maths of this in another post) but say you did buy this amount in the next two years (and believe me, thats easy to do in this market), then in 10 years from now, you’d have a portfolio worth £2,000,000.  Just say you had never remortgaged or taken any money out – do you think that you might be able to take a few hundred thousand out at that stage?  Its a no-brainer.
4. The market is not risky and the credit crunch is a transformational phase that we must go through in order to emerge stronger than before; rental demand has never been higher.  We are getting more and more calls from people looking for accomodation.  You just need to follow the normal rules of property; buy in the right location at the right price.  Follow these rules and you will never go wrong.

So, is now a good time to get into property investing?

Yes, yes and yes.

To access the article which rankled me slightly, go here but come back here afterwards to learn more about cashflow secrets in the property market.

http://www.telegraph.co.uk/finance/personalfinance/borrowing/3130553/Blackest-week-yet-for-buy-to-let.html

Think Carefully About The Location Of Your HMO

By Matthew Moody | HMOs

 Location is a key factor in any property purchase but even more so when you are considering buying a HMO.

A recent government report from Housing Minister, Caroline Flint showed concern over the build-up of HMO’s in certain areas; particularly university towns; and wants new powers to allow local councils to dictate where a HMO could be allowed to operate.

There were several issues identified including:

• restricting the Use Classes Order planning rules allowing for HMOs to be brought under greater council control;

Matthew’s comments:  So what does this mean in practice.  Essentially, it means the local councils could be able to force a planning application to be made whenever a house is classified as a HMO.  Remember a HMO is where two or more unrelated people are sharing a house, so even those of you with small HMO’s of 3 or 4 rooms could be affected. 

The government will then raise additional funds through a new planning tax; this elongates an already lengthy process to purchase a property (take 8 weeks at the minimum in the current market) and means that the establishment of an investment for the landlord is subject to a planning officer who does not understand this market, making a decision on whether to allow the HMO to operate or not.

• capping and controlling the distribution and the dispersal of HMOs by using the local planning system to set up ‘areas of restraint’, which have been shown to help balance communities. 

Matthew’s comments: This essentially means “selective licencing” requirements to be brought upon a particular area.  This means several things could happen. 

Firstly, if HMO’s are refused to be allowed to operate, then the landlord will either have the choice to single-let or sell-up.  As most HMO’s are bought on a multi-let basis, its unlikely that more than 25% of them will stack on a single let basis and thus the landlord will need to sell the property. 

This then means a period of void whilst the landlord tries to find somebody to purchase a property in what the government are calling “student ghost towns”.  With the current market, they will probably have to heavily discount the price, wait 6 months to sell and make a loss on their investment.

Universities and student unions should develop housing and community strategies that include: community liaison officers; student codes of conduct; neighbourhood helplines; and use of authorised student accommodation agents to help protect students from bad tenancy deals. Many universities have already invested heavily in new student halls which could help ease pressures.

Matthew’s comments:  Lets take this one in two parts.

More community liason and codes of conduct are needed, are necessary and will help – but they won’t solve the problem. The problem starts at home and with society at large – not with the students living in a new area.  So whilst having a helpline that the neighbours can ring to complain (notice nobody ever rings up to “thank” anybody anymore) and having a liason officer to talk through issues between students and residents is fantastic – this needs to be driven home through by the university in controlling their students behaviour and penalising them for it should they break the rules.

The formation of even more new student halls is one which I particularly have an issue over.  I have no problem with universities trying to house more students but its recognized that generally a university can’t house more than 50% of its students (its often far less than this but I use this to illustrate a point).  This being the case; the only way of building more halls of residence is to take down older buildings, classrooms, lecture theatres or look for barren land (have you seen much of this recently in most towns in the UK?) where they can redevelop it.

Most of these student halls are owned by large faceless corporate bodies who are interested in numbers – a 200 unit student hall housing 600 students is a very lucrative business to be in.  They are not necessarily going to take the same care and attention that an individual private landlord will over their property.  The argument goes both ways I know but ultimately, put your hand on your heart and ask yourself – would you rather deal with a caretaker who doesn’t have the answer but has to ask somebody else who doesn’t know who asks somebody else in an office 300 miles south of you who says no – or would you rather ring up the landlord and get a yes or no answer directly.  I know which one I’d rather prefer to deal with.

• Councils should target resources such as refuse/letting board collections, street cleansing, fly posting controls at key times in the academic year; establish landlord accreditation schemes; link the demand with regeneration opportunities; work with universities to consider purpose

Matthew’s comments:  all of this is done already as far as I am aware and is just the government either trying to think of something else to attach to this report or thinking up something new – which they haven’t.

All of the university towns that I am aware with have accreditation schemes, they are all regenerating their housing stock and community facilities, refuse collection could always be improved (try a national recycling scheme as a starting point) and fly-posting I have seen in several cases work well.

So, whats the point of this whole report and why was it commissioned?

The reason banally given is that student build-up which is not “governed” leads to student ghost towns in the summer which negatively impacts the local communities.  The question I ask is – has Caroline Flint ever been to Skegness, Bournemouth, Littlehampton or Scarborough in winter?  I don’t think any of these communities are exactly buzzing when the summer tourist season leaves but then the government cannot control the seasons nor can they persuade people to go to Skegness in February – because frankly, its cold, wet and rather horrible.

My thoughts are that we do require more liason and close links with the communities – and the universities, accomodation officers and landlords should be encouraging this.  But, at the same time, even more regulation on a sector which is already crippled from the negative connotations and red-tape that surrounds it today, will only serve to drive more landlords out of the market and push these students towards either “unlicenced” landlords or the larger “corporate” bodies offering a staid commoditized option.

My recommendations would be for actual real consultation to happen – rather than the usual government departments consulting with other government departments – for any real chance of finding out exactly what is going on and how we can then work together to turn things around.

For more information and to make comments, visit: http://www.communities.gov.uk/publications/planningandbuilding/evidencegatheringresearch

Can You Really Learn Any More About Property Investing?

By Matthew Moody | Property Investing

I often ask myself this question whenever I see the latest greatest seminar, workshop or pitch-fest about property investing come through on email.

All of a sudden, every second email seems to be promoting the same thing to me but none of them are very different.  People you haven’t heard from for ages jump out of the woodwork and start telling you why you should go to this property event – as if their lives depended on it.

After all, what makes one person decide to go to a seminar may not be the same reasons another person decides to go to the same event.

So, I’m sure you’ve heard all about Simon Zutshi’s event taking place this weekend at Excel in London.  I’m sure you’ve heard that Dolf De Roos will be speaking.  I also know of several other high profile guest speakers that will also be appearing that have tons of great information to impart.  I’m miffed they didn’t ask me to speak about HMO’s but that’s their loss – right!

The event is called Property Magic Live and it promises to be THE event of the year for property investors.  However, its not for everybody.

http://tinyurl.com/matthewspropertymagiclivebonus

There are two questions you need to ask yourself:-

1) why should I go?
2) what will I learn?
3) why should I book through you?

Lets tackle them in turn.

1) why should I go?

I’d say it depends on where you are with your property business and where you want to be.

Don’t go if:-

• you’re new to property, not yet off the blocks or still deciding whether property is for you
• you don’t have enough money to cover next months expenses
• you are seeking some specific advice relevant to your personal situation
• you want a small intimate event where you can ask questions and get the answers quickly
• you’ve spoken to your mate down the pub and he’s told you that property is going to crash further and you won’t make any money out of property – and you believe him/her

You should go if:-

• you’re full-time in property and intend on making your living from this through the next couple of difficult “recession” years
• you’re in sale & rent-backs and you’ve reached the end of your cashback and you’re wondering what else can I do to generate cash
• you’ve been buying through a bridge and remortgage strategy and the bottom has fallen out of your world and you don’t know where to go to purchase your next property
• you’ve seen some great deals but you don’t know how to make them stack or where to go for finance or even how to finance them
• you used to buy new builds but can’t find anybody to finance or structure them any more

IF YOU SPEND MORE THAN 30 HOURS PER WEEK IN PROPERTY, YOU NEED TO BE AT THIS EVENT.  IN FACT, I’D SAY YOUR FUTURE DEPENDS ON IT.

http://tinyurl.com/matthewspropertymagiclivebonus

2) what will I learn?

What you will learn at this event is expert advice from some of the best property minds in the business.

Here’s a small sample.

** Know how to find motivated sellers **

The professional property investors all have multiple ‘buckets’ from which they gather leads. While each bucket is straightforward to implement the real challenge is to systemize it all so that it doesn’t take over your life. 

And systemizing your business is actually one of the key secrets to making your business work (which I cover in depth on my own workshop here)

For example: Estate Agents

In the current market, one of the easiest and cheapest ways (i.e. its free) is through Estate Agents.  So why is it that most property and BMV investors overlook this one?  Simple, their mindset has not changed enough to understand it works!  I’ve had tons of deals through estate agents – get the right one and you should be getting regular calls from Estate Agents offering you deals.  Get it wrong and you’ll be the one losing out.  

The experts will share with you how you can get estate agents working for you bringing you lots of deals where they have already negotiated a big discount. 

Matthew’s Value on this learning: in my mind, its worth at least £100 to know this – in fact, that’s far too lame, make it £500 to learn how to really improve and systematize this part of your business.

** Expert Negotiation skills **

Expert negotiation can take a ‘good’ deal and transform it into the Deal Of The Year (or the Deal of The Week!). 

This is where we are talking about adding 5-figures (in some cases more than your entire annual pay-check) just by executing 10 minutes of expert negotiation.

• It doesn’t take many of these deals to make you a millionaire.
• Who will be teaching you this at Property Magic Live? – none other than Mark Harrison, who just happens to be one of the top property negotiation experts in the world and someone I can personally recommend!

Matthew’s Value on this learning: Well, I know that Mark sells a fantastic ebook for just £27 (its madness, the information is worth at least £97) and his courses sell for between £200 to £350 on their own.  So the value for just this section along I would estimate is at least £150.

** How to mortgage-proof your property empire and make Cash flow from Options **

• Options can often allow you to make significant amounts of money from property without even having a mortgage, which is even more important bearing in mind the current mortgage market difficulties due to the credit crunch.
• Is negative cashflow on your properties slowly draining your cashflow? Well, you can use options to make extra cash flow from your existing property. I bet you with this info you can take at least a couple of properties in your portfolio and turn them cashflow positive.

Matthew’s Value on this learning: I’m not sure who they’ve got to present options but if its any of the usual “suspects”, then I know you’ll be getting between £197 and £497 worth of value from the people presenting this. 

** Your personal belief and mindset **

This was covered in depth by Simon on his Death Of Property Investing report.   This is not about mumbo-jumbo ‘if you think it, then it will happen’.   This is all about a mindset that leads to ACTION.

Aside from the in-depth strategies you will learn, the most important thing you will gain from Property Magic Live will be the self belief and inspiration you will gain from the numerous speakers sharing their success stories and strategies so that you can copy their success.

The truth is that there are no reasons, no excuses why you should not be making a fortune in the current market. Lack of belief and knowledge is all that may be holding you back.

Matthew’s value on this learning: I’ve paid anything from £20 to £197 to hear somebody talk about self-belief, mindset and taking action.  I estimate you’ll be getting at least £97 worth of value out of this session alone.

In truth, I take my hat off to Simon because these speakers together with Dolf De Roos (who I have seen three times and cannot wait to see again) are among the best of the best.  To pull these people together under one roof for two whole days is just INSANE.

** Networking with the professional property investors **

Simon mentions this on his website and I talk about it a lot (in fact, its why I run my own property networking group).

At this event, you’re going to be mixing with professional property investors who are still buying, top-flight mortgage brokers, solicitors, surveyors (yes, there will be surveyors at this event!), accountants, property finders, bridging and finance guys, your next joint venture partner – the list goes on and on and on.  And two whole days and one whole night of it – wow.  (remember the real deals are made about 11pm at night in the bar – be there!)

Matthew’s value on this learning: absolutely priceless.  I’ve met all of my JV partners, financiers, marketeers and property sourcers through networking – you just cannot afford NOT to network. 

http://tinyurl.com/matthewspropertymagiclivebonus

3) So why should I book to go through you?

Yes, I was asked to promote this by Simon and yes, I will receive a commission from him if you book through me.

To be honest, I was a little lapsadaisal in my approach and I didn’t get the details through until well after the initial launch.  I sat back a little and watched the inevitable emails come through all using pretty much the standard email and patter.

Here’s what I’m going to do for you – my loyal readers and friends.

• I’m going to give you half of my commission so that you can use this on your hotel room (thats about £75 by the way)
• I’m going to invite you to join me on my 1-hour CASHFLOW IS KING teleseminar after the event to give you the latest strategies I am using to increase my CASHFLOW (value of a minimum of £49)
• I’m going to offer you a FREE 30-minute consultation on any aspect of your property business that you need help with right now – to ensure that you get the 1-to-1 support that you need (value of a minimum of £97)
• Total value of £221

So, if you’re interested, what do you need to do now:-

• Clear all the cookies from your browser as unless you book through my link, you cannot get my bonuses
• Click on the links and make your booking, then send me your receipt
• Remember the deadline for booking your place is Tuesday 30th September so you have ONE day to decide whether you wish to attend or not
• Don’t wait until the 30th, because there are still some bonuses that Simon is giving away that you will miss out on…
• Be decisive and book now

http://tinyurl.com/matthewspropertymagiclivebonus

I look forward to seeing you at the event

best regards

Matthew

Financing HMOs

By Matthew Moody | HMOs

How does a lender assess a HMO when determing whether they can lend you the funds to purchase one?

Essentially, they value the property in very much the same way as a single-let property; using sold comparables in recent months and the local area to determine the property value.

To assess the HMO rent is slightly more complex when trying to finance a HMO.

Most surveyors I’ve met will survey a room at low figures more akin to student letting than key worker or professional lets.  This means that you have your work cut out when you are aiming at renting your HMO to a group of professionals at £400+ pcm rates.

I’ve often had surveys back where they’ve valued a 6 box property at £50 per week per room which is a lot lot lower than the £85 to £120 per week I normally get!  The best thing to do is to work with them, show them evidence of rents in the area (use websites like spareroom and easyroommate) and tell them what you are planning on doing.  Sometimes they will listen – sometimes they won’t.

Once the valuation of the property and the rental valuation are done, everything else proceeds as normal.

What is a HMO Licence?

By Matthew Moody | HMO Licence

Its a question that’s often asked of me when I do my talks, workshops and mentoring – and the answer is fairly simple, although the implementation can be more difficult and time-consuming.

A HMO licence is a licence granted by the local authority (in the area where your HMO resides) for you to be able to let your property to a listed number of households and people.

It will generally dictate any requirements for fire safety, health, cooking and amenity improvements that are needed in order to comply with the licence.  You will generally get three months within which to install any requirements needed by the licence but a “reasonable time” must be allowed in order to complete these works.

The licence is issued under Section 64 of the Housing Act 2004 and specifically relates to Schedule 5 Paragraph 1 of the Act (if you have a few hours on hand to read the act, its absolutely mind-numbing).

Normally, a licence will be issued for 5 years or until it is revoked and at all times, the conditions under which the licence is granted have to be maintained (ie fire alarm system, cooking facilities etc).

The local authority may carry out an inspection to ensure that the licence conditions are complied with and to ensure that adequate maintainance in accordance with Part 1 of the Housing Act 2004 is being carried out.

In future posts, I’ll talk further about the Licence application process, what a licence looks like and the typical kind of conditions you may expect to be imposed upon your property to meet Housing Act 2004 standards.