Houses In Multiple Occupation (HMO)

 With the chronic housing shortage in the UK & demand for rental properties there has been a growth in the market for room rentals. HMO’s – houses in Multiple Occupation offer landlords the opportunity to look at the possibility of increasing their rental income and rental profits by offering accommodation on a sharers basis.

There are many different types of HMO’s and they can be classified by the tenant profile.

The tenants can be categorised into 3 main areas:

  • Students
  • Professionals
  • Local Housing Allowance tenants.

The professional market could then be split into young white collar professionals, normally graduates and then non-graduates who may be more likely to be trade orientated than office workers.

When you create an HMO ask yourself - who are my target tenants?

Then you should look at your local area to determine the demographic and design your HMO around this market.

For example, top end professionals will usually want top end properties where things such as private bathrooms and Wi-Fi would be critical to this group. It is therefore good to put in as many en-suite shower rooms as possible and install the best broadband product available.

In these HMO’s televisions are not as highly regarded as the broadband speed & the need to be able to download large quantities of data fast. Another important factor is to make sure there are a good supply of local bars, coffee shops and local transport links.

At the opposite end of the spectrum we have the Local Housing Allowance (LHA) tenants. These tenants are on a tight budget and are therefore more motivated by price rather than the services on offer. It could be the case therefore, that in LHA HMO's you do not need to provide Internet and you don't need to invest in creating en-suites, it just doesn't make financial sense as they would struggle to pay the higher rent. 

If you are wanting to get started, the simplest HMO's would be either a 4 bed Student HMO or 4/5 Bed professional HMO.

A good way to start an HMO would be to buy a 3 bed house offering 3 large bedrooms & 2 reception rooms. You then use either one or both of the reception rooms as the extra bedrooms in order to allow for 4 or 5 sharers in the house. These days you can also find up and running HMO's for sale. 10 years ago you were unlikely to find many on the market.

Another way to get higher returns would be to look at houses with the opportunity to get 6 or more bedrooms by converting a loft or adding on a single storey extension.

Multi Let Refurbishment underway

We’ve just completed the purchase on our first multi let property.  It’s very exciting as the cash flow could be fantastic.  We have JV’d with a family member to buy this property.  So we have split the risk and the capital required but of course the profit is split too. However we liked this approach as it was our first one so we wanted to test how things go. It also helps my Mum in Law to progress her property portfolio. The deal looks like this:  Purchase price - £82,000.  Refurb & furniture: £8,000  3 bed property which we’ll turn into a 4 bed multi let.  Expected cashflow =£500 per month It’ll take approx 4 weeks to refurbish the property.  It’s in an area which is popular for professional multi-lets, so shouldnt be difficult to let out.  If this property project is successful then we’ll repeat the formula.  We wanted to...
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House in multiple occupation licences are necessary

  Landlords might like to check their house in multiple occupation (HMO) licences are valid after one landlord was fined and ordered to pay back £37,407 in rent. Rizwan Ahmed was letting a three-storey, nine-bedroom residence on Fulham Road - that was occupied by at least five tenants - without the required certification and received a £20,000 penalty as a result. It was also found that he had breached five rules of the HMO by failing to maintain fire doors, wall and ceiling plaster and fire alarm systems. A spokesman for Hammersmith and Fulham Council noted that Mr Ahmeds tenants had been living in poor conditions. "This should be a warning to all landlords that the council takes HMO licensing and management regulations seriously," he remarked. Those interested in finding out more about the HMO can do so at the Office of Public Sector website, as well as the Department for...
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Planning and Houses of Multiple Occupation

  Why the change in the planning laws is good for HMO Landlords! Lets look at this so called change in the planning rules for HMO’s from a completely different perspective. If I was to have an imaginary conversation with the Housing Minister who introduced this change while he was still in office I think it could go like this. Readers: Please note (1) I have never had a conversation with the Housing Minister – this is pure fantasy and my apologies to him. (2) The current government have indicated that they intend to repeal the changes made in October but few details are forthcoming, it appears they are going to leave it to each Local Authority to do what they want! Me: Thank you Housing Minister for agreeing to talk to me about the change to the Use Classes Order for HMOs which became law on 6th April 2010. I,...
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How Multi Let Landlords Can profit From The Change in Planning Rules

[caption id="" align="alignleft" width="148" caption="How Multi Let Landlords Can profit From The Change in Planning Rules"][/caption] Caution- we have not had any precise the details of the change so much is speculation. The detail and the change in the law is expected April this year. I have had numerous enquiries about what the effect is going to be from the change of the Planning Use Classes Order for HMO’s this April. My quick answer is the same to all the changes in housing law since 1988, with two exceptions, it will do little to improve the lot of HMO landlords. I suspect that in practice little will change, it is all for show to justify some Housing Ministers, existence, though a lot will depend on how rigoursly the change is enforced. For those who want a longer more reasoned answer please download my FREE article. FREE Download request Email Marketing You...
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Top Tips for New Investor, Jim Haliburton

Cash Flow - I was tempted to make this the only tip, perhaps because when I was writing it I was going through one of my regular cash flow crises, so important is it. Unless you can pay the interest and bills in operating your business then you will go bust. It is essential that you have sufficient reserves to ensure any expected contingency can be met.Three months running costs and mortgage payments is considered prudent. I am the wrong person to give this advice as if I had three months reserves I would buy more property! By reserves I do not mean cash in the bank, I mean available credit lines, for example, credit cards, bank overdrafts etc.Preserve your Capital – Once you have done your capital you limit your ability to buy more property to buying below market value (BMV) and you will have to spend out for bridging finance. Preserving your...
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