Category Archives for "HMOs"

How Long Have HMO’s Been Around?

By Matthew Moody | HMOs

I came across a fascinating article at the weekend about the change in household living habits over the last 300 years and it got me thinking about how our modern interpretation and societal prejudices has changed our perception of HMO’s for good. 

A box of ones own  ably written by the BBC and featured in Dundee University’s Design Blog, the article talks about how our modern concept of “family” living has changed over the centuries.

Back in the 18th century, it was common for a man and wife, together with children, lodgers, housekeepers, other employed staff and relations to the owners living in the one house.  A kind of super-HMO I guess in so far as these were often large houses with multiple rooms, living quarters and people occupying them.

But this wasn’t uncommon and these types of HMO’s existed across the country!  People who worked together would often live together supporting each other in their working and private lives.

Move this forward to the Dickensian-image of the greedy landlord renting out hovels to poor working class people by the room or the nosy landlady snooping around the rooms of her lodgers, and your all too familiar picture and perception of a modern day house of multiple occupany starts to appear.

Its a shame that people can’t see HMO’s for what they are – an affordable fun way of renting for young and old professionals with a built-in community of people that can help and support you along the way.

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

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.

12 Steps To A Perfect Kitchen In A HMO

By Matthew Moody | HMOs

When you’re thinking of creating a HMO (Houses of Multiple Occupation), then you need to think very carefully about your kitchen.

You could have as few as five people sharing it right up to ten or more – depending on the size of your HMO!

Its essential that you have enough space for everybody to cook in comfort and here’s some guidelines that I’d recommend (outside of any essential guidelines required by HMO’s that are licenced):

1. a double oven is essential – tenants often cook at the same times
2. you need at least a four plate hob – anything less won’t really do
3. you should provide a combination microwave oven so if your tenants decide not to cook microwave food, they can use another oven
4. you need at least one fridge per three people (any more is fool-hardy both for your electric bill and for pandering to people; you can get a lot of ready-meals in a fridge drawer)
5. you should really aim to provide a dish washer as it means that dishes do get washed and its a lot easier and probably more economical than washing by hand
6. you should aim to have a big enough kitchen to have a table and chairs in to seat at least 2/3 of your tenants
7. every tenant needs their own cupboard to store their food
8. provide all the pots, pans, crockery, glasses, cutlery, tableware etc – it saves so much hassle and arguments over who owns what!
9. try to provide one WOW factor in every kitchen.  For instance, we have a beautiful coffee machine in one, a large picture in another, a fantastic view from another – you get the picture
10. provide all instruction booklets in a drawer thats easy to hand
11. make sure you have fire blankets and fire extinquishers
12. make sure you have your management noticeboard in the kitchen as everyone will read any notices you put on whilst they are cooking

At the very least, step into that kitchen and imagine yourself living there and make it a nice place for your tenant to live in.

Can Student Lets Still Be Profitable?

By Matthew Moody | HMOs

I saw this great post yesterday about investing in student HMO’s which I think you should check out – Student Let Success

It details some of the same strategies that I teach for property investing but this time focusing on the student market.  One of the great things I’ve always found about the student market is whilst the yields are generally lower than I attain in my professional multi-lets; often the hassle is much less.

Why – surely most students are out partying, causing noise and damage and not treating your property with respect?  Well no, actually most students I’ve let to have been pretty courteous and have respected their property.  Of course, there’s usually lots of bottles, pizza boxes and dvd’s stacked about the place but that’s student living for you.

Once you’ve found your students for the year, most of the time; they’ll be there until the following summer meaning that you have some piece of mind in not having to continuously find tenants.  From a property investors point of view, thats one less thing to worry about.

The only other piece of advice I would offer on top of Hot Property’s article is to make sure that you contact the university or college in your town first to understand the market, the individual accreditation and rules they employ and get to know the local housing officer well – it will really help you in the long run.

So, if you’re interested in finding out a bit more about student investing, then take a look at Student Let Success and find out how to rent to students the easy way.

Investing in HMO’s

By Matthew Moody | HMOs

The current property market is tough and cashflow is tight.

With general rises in interest rates and rents still static in many parts of the country, the majority of landlords letting to individuals (single lets) are either just breaking even or in the majority of cases subsidising the property. 

By investing in HMO’s, you are investing into a business system that can provide you and your families with a strategy that mitigates your risk, provides you with massive passive cashflow and allows you to add value to your properties.

Whether you are a first-time landlord or a seasoned player with many properties, I would always encourage everybody to have a HMO strategy within their business model.Read More