Do HMOs still stack up as an investment?

admin    Uncategorized     agents

Over the last 15 years, the HMO market has been transformed and there has been a boom. The reason for the boom  was, quite simply, that HMOs could generate far better returns than single home lets.  

But as the market grew, regulations tightened. On top of the extra duties, obligations, costs and tax changes that affected every landlord, HMOs were subjected to additional health and safety rules, including these two in October 2018:

1. Minimum sizes for bedrooms were introduced, meaning some landlords could no longer let certain rooms, dramatically reducing their income
2. The ‘three storeys or more’ criteria for needing a licence was removed, meaning any HMO housing five or more unrelated individuals had to be licensed.

HMO landlords have a lot to know, do and stay on top of. And now, in addition to higher mortgage interest rates, HMO landlords are finding their profits dented further by rocketing energy costs. This begs the question, do HMOs still stack up as an investment?

The upsides of HMOs

There are two big benefits to letting a property as a HMO. Firstly, while HMOs will always be more time-consuming than single-let properties, the reality is that they still usually generate a higher profit.

Secondly, a change in tenancy in a single-let home often means you have a void period with no rent coming in. The benefit of having each room let individually is that if you have one room vacant between lets, the other rents should be more than enough to cover your costs until the room re-lets.

And there’s a potential bonus to having an HMO: because they are larger properties, they may have better scope for adding value through extending than a smaller single let and if you can refurbish and extend when you buy, you could increase the capital value substantially.

5 things to consider if you’re thinking of investing in HMOs

1. Capital – As HMOs are considered higher risk, they require specialist mortgages and lenders tend to offer lower loan to value percentages, meaning you’ll probably need to find a bigger deposit than if you were getting a traditional buy-to-let mortgage.
2. Demand – Generally speaking, every major city should be able to offer decent HMO investment opportunities, but some areas have become saturated. As with any investment, research the market and make sure there’s good demand before you buy anything.
3. Speak to local council – Every local authority has the power to make its own licensing and planning rules, and some are far stricter than others on what they will and won’t allow – particularly if you’re looking at converting an existing standard home to an HMO.
4. Invest in quality fittings – If you’re targeting working professionals, aim to fit out the property with the amenities you’d want in your own home – e.g.
   • Fast WiFi
   • Good quality showers
   • Modern cooking appliances
   • Efficient laundry facilities
   • Plenty of storage
5. Maintenance schedule and budget – HMO properties have higher traffic, so you’ll need to redecorate and carry out other maintenance and repairs more often than you would with a single let. But it’s worth staying on top of things so that your existing tenants are encouraged to stay and to make sure you’ll be able to re-let rooms at a good rent as and when they come up.

As with any buy-to-let, investing in HMOs should be seen as a long-term investment. Make sure you plan and budget well ahead for maintenance and repairs over time. Not only will that help you secure the best rental income, but it will also help protect the capital value, which should appreciate well over time.

If you’d like any advice about HMO investing, get in touch with your local Leaders branch who will be happy to advise.

View Full Article: Do HMOs still stack up as an investment?

REFORM: ‘We need legislation that works with landlords, not against them’

admin    Uncategorized     agents

With one in five households now renting, the private rented sector is an essential part of the housing market.

As the government has reduced its housebuilding strategy for all local authorities from mandatory to advisory, with some councils scrapping targets all together, the housing market is shrinking in relative terms.

With fewer houses being built, and no Help to Buy scheme, more renters will be stuck renting for longer.

Meanwhile, the Renters (Reform) Bill – which creates a big change to the way landlords can regain possession of their properties – is being brought in at a time when some are already looking at selling their buy to let portfolios.  

Whilst there is widespread support for raising the standards of private rented properties, interestingly the Decent Home Standard is notable for its omission within the Bill.

Too far

The latest tranche of regulation and rules however are a step too far for some landlords.

Recently, the sector has become a target for the press on the basis that a minority of landlords cause problems for tenants in the lack of care for their properties and the people they house.

However, rented properties create independent living for millions – and contribute hugely to the British economy – so, we need a piece of legislation that works with landlords, rather than against them.

Related to these reforms, where is the pledged investment in our court system? The government have shied away from creating a Housing Court.

Never in my 27 years as a lawyer have I felt more embarrassed by the delays and unhelpful decisions produced by courts.

Eviction date

A client who requested a warrant for possession through me back in November 2022 is still waiting for an eviction date.

With the latest crises in London courts, and bailiffs requiring more personal protection equipment before carrying out evictions, he will be waiting even longer.

With significant rent arrears when the order was made, he is losing £1,500 per month until the tenant leaves, meanwhile his mortgage payments have risen in line with interest rate increases. Where is the justice in this? 

There is a very real danger that this Bill will be the last straw for landlords and there will be an exodus from the sector, with many more previously let properties being put up for sale.

This will add to the already shrinking housing stock available to rent, and consequently with rental properties in high demand, rents could continue to surge.

Over the years, landlords have faced increasing demand to improve their stock and make it safer for tenants.

Shrinking

That is no bad thing, but the higher cost of living affects everyone – including landlords. As interest rates continue to rise and impact mortgage repayments, the investment within the rented sector and the yield available – following the required improvements – is shrinking.

Further effective lobbying is clearly needed on the details and implications of this Bill if it is to benefit all parties, otherwise securing a rented property is going to become much harder.

Even once the changes to the reforms are finalised and in place, what the Bill really needs to address is the infrastructure for landlords seeking possession of their properties for genuine reasons.

Default in rental payments as debt rises, rising antisocial behaviour and a need to sell the property to realise the capital, are some of those reasons.

All the rules can be in place, and are currently, but without a court system that works to support such situations, landlords will continue to feel persecuted by a broken system and this will not improve the current housing crisis.

Author bio

Gina Peters is Head of the Landlord and Tenant department at Dutton Gregory, which has specialised in residential landlord and tenant law for 22 years.

View Full Article: REFORM: ‘We need legislation that works with landlords, not against them’

Portal launches in UK offering landlords direct online advertising to find tenants

admin    Uncategorized     agents

A European lettings portal has launched in the UK aimed at globe-trotting students and young professionals.

Rotterdam-based HousingAnywhere, which specialises in mid- to long-term rentals, now covers London, Manchester and Birmingham where potential tenants will be matched with accommodation providers such as private landlords, serviced apartments, co-living and Purpose Built Student Accommodation.

The platform only offers online viewings and allows tenants – 70% of whom come from abroad and stay for between four and 12 months – to book months ahead. The portal is different to established websites like Rightmove, which only allow letting agents to upload properties to their listings.

Ideal tenant

On HousingAnywhere, landlords set their preferences for an ideal tenant who, when they reserve accommodation, pays one month rent in advance, which HousingAnywhere guarantees.

Contracts are drafted and signed by landlords and tenants, who both agree on conditions such as giving notice, and the firm transfers payment 48 hours after they move in.

Creating an account, listing a property and responding to messages is free, and a one-time commission fee – 25% of a month’s rent – is only applied when a property is successfully booked.

“The process of listing an accommodation also includes certain steps to verify the property owner’s identity in order to offer a safe online experience for both tenants and landlords,” regional manager Martijn De Graaf (pictured) tells LandlordZONE.

“HousingAnywhere has a secure booking payment system to ensure the tenant’s payment is safe if a listing is not as advertised.”

De Graaf adds that once it has established the model in the first three cities, the firm will focus on extending its reach throughout the UK.

Read more about property portals.

View Full Article: Portal launches in UK offering landlords direct online advertising to find tenants

Is the short-term lets market to blame for the housing crisis?

admin    Uncategorized     agents

We all hear about the rise in short-term lets, and how it might be to blame for the housing crisis but is it really true?

With growing regulation around short-term rentals such as Airbnb’s, many holiday-let owners are being forced out of the market.

View Full Article: Is the short-term lets market to blame for the housing crisis?

Landlord Crusader: In the end, it was the Bank of England that broke the PRS

admin    Uncategorized     agents

As hardworking and worried landlords, we all know the buy-to-let market is facing a potential catastrophe of rising interest rates, tightening lending criteria and falling house prices.

That inevitably means many of us may find ourselves struggling to keep up with mortgage payments

View Full Article: Landlord Crusader: In the end, it was the Bank of England that broke the PRS

BREAKING: Landlords tell housing minister face-to-face that sector needs support

admin    Uncategorized     agents

Landlords in Wales have called for the country’s government to make more effort to encourage private investment in the sector during a face-to-face meeting with housing minister Julie James.

The National Residential Landlords Association (NRLA) has asked her government to exempt landlords from the higher rate stamp duty, overhaul or (it is hoped, reduce) the taxes they already pay, unfreeze LHA benefits rates and make low-interest financial support available to BTL investors via the Bank of Wales.

The recommendations are within a report launched this week by the National Residential Landlords Association (NRLA) called the State of the Welsh Private Sector.

It looks at supply and demand within the sector, the costs of upgrading properties to meet EPC minimum standards, and the effect of the country’s recently-introduce renting laws.

An event to present the report’s findings at the Welsh parliament organised by the NRLA was attended by James and the trade association’s chief executive Ben Beadle, among others.

Extra taxes

The recommendations come as landlords with properties in Wales have, like those in England, faced both extra taxes and new regulation, as well as plans to introduce rent controls – unlike in England.

Landlords in Wales must now comply with tighter operating rules following the introduction of the Renting Homes (Wales) Act including more pro-tenant eviction rules, as well as higher purchase taxes through the country’s Land Transaction Tax (LTT) or stamp duty.

The NRLA is hoping to persuade the Welsh government to take a more balanced approach to private landlords, and the report draws on data from several sources to try to establish what the PRS in Wales looks like now.

The Welsh Government’s response to the report is expected today and LandlordZONE will update this story once it’s received.

To download the full report PDF click here.

Pic credit: NRLA

View Full Article: BREAKING: Landlords tell housing minister face-to-face that sector needs support