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  • Landlords in Distress

    Concern over investors being sold HMO dream



    An article in Property Industry Eye today suggests that HMOs being sold to newbies will be the next big property scandal.

    It has been written by a lettings agent, Bill Rockett or Rockett Homes, with 15 years experience and he has expressed grave concerns:

    Over the last few years, companies have sprung up everywhere offering to source, renovate and manage HMOs – with promises of huge returns and future riches.

    The reality we are seeing is very different. In my area thousands of rooms have been created, but for a market of maybe just hundreds of people.

    This has resulted in:

    • Room rates plummeting.
    • Many unfilled rooms.
    • Lots of problems due to these houses not being built to home this amount of people.
    • High maintenance and annual refurbishment costs.
    • Anti-social issues.
    • High level of maintenance and tenant issues.
    • Quality tenants shunning HMOs due to bad experiences with shared houses.
    • The quality of the HMO tenants is dropping in line with the prices.
    • Many landlords saying that for the first time they are really struggling to find tenants for their HMOs.

    This has had a knock-on effect meaning that apartment/flat prices are tumbling due to lack of demand as HMOs have flooded the market and lured in tenants who would otherwise have had their own apartment.

    In turn, apartment prices have had to drop to try and compete with HMO prices.

    It is the same with the student market as shared houses have taken a real bashing this summer.

    The only winners here are the developers who are selling a dream that is not a reality.

    They get paid handsomely for sourcing and renovating, so tenanting and managing is just a nice little bonus.

    I worry for landlords who have sunk all their money into HMOs, as if the rent does not cover the mortgage you will find an HMO very difficult to sell.

    Full/source article 

    I think this problem has been compounded by property guru trainers telling people that they can achieve a commercial valuation instead of a bricks n' mortar valuation on their property, which is dangerous information to give.

    Facebook is a Wild West of these kind of sourcers and gurus who are promising easy riches through HMOs and Rent to Rent HMO creation, without mentioning that HMOs should really only be undertaken by landlords who have experience of single occupancy BTL and tenant management.

    Are we seeing the next big property scandal here and will there be bankruptcies and re-possessions?

    SEE ALSO  -        HMOs - My little goldmine

    UP NEXT -            Progressive Property/HMO Daddy - HMO Commercial property valuations

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    Great article, you wouldn’t believe the number of “opportunities” promoted to us.

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    I rang the author, Bill at Rockett Homes, and he drew my attention to this property he was trying to let in Stoke on Trent.



    This property has one room rented and, even if it had all five rooms rented at this rate, it would only just break even.

    The investor is tearing his hair out!  Bill said there were "identi-kit" HMOs popping up all over the place, and "you couldn't give the rooms away".

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    That is classic oversaturation of the HMO market, you also only have to look at the quality of that kitchen to see.

    Not only is there lots of HMO players but they are trying to out-do each other on quality of the HMO in order to win the tenancies over the next guy.

    This is "good news" for tenants of HMOs but not so great for HMO owners in those cities where supply is higher than demand.

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    _________________________________________________________________________


    The above post is not financial advice, its often me rambling - passing time on a coffee break.
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    _________________________________________________________________________


    I think every HMO landlords I know have a problem achieving the yields they set out to achieve

    its a specialist market

    i know of one deal where a landlord was selling

    he had loads of voids and wanted out so he filled the rooms with friends who did not pay rent or lived there and they all were on a tenancy agreement

    it looked perfect

    guess what when to transaction completed all tenants left without a trace

    a mug newbi landlord bought a pup

    DD is vital but if your new you can be taken in

    HMO is for the experienced landlord I don’t touch them with a barge pole give me an ex council house 3 bedroom every time

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    Learn Change and Adapt ?????


    Interesting article. The area that he speaks about does seem to have attracted a lot of HMO investors in the last few years, and continues to do so.

    I met up with one company there and they were converting a couple of houses into a 9 bed HMO.

    The conversion and the rooms looked great, the location (for me) wasn't ideal and not one I would choose, but it's their local market and they know better. They'd let all but one of the nine rooms when I had a sneaky look at their advert a few weeks after the project was finished. But there do seem to be a lot of HMO conversions in the Stoke/Newcastle area... made easier as no Article 4.

    I don't feel that the student market can be lumped into the same negative argument. It's a different market and may have empty rooms for a other reasons. Again, no A4 in Stoke.

    The way I see it with students if you create the best houses at a more expensive price, then worst case scenario is you have to drop the price and will always have the best places at that price point - with students the perceived quality of the tenants is unlikely to fall.

    Also I like areas where there is a Plan B, not paying more than the family house value, and if the students vanished then the area would be a great family area for 'normal' people.

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    Its all good in Cardiff, professional rooms are not hanging around for long and still achieving good rates (latest ensuite room let at £560 pcm, doubles £400-£460pcm)

    There is also an endless queue of homeless and tenants in receipt of benefits looking for a room to rent.



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    Rooms In Cardiff info@highyield.property | Guaranteed RentLow Cost Management £50/month |Pay As You Go HMO Management | Cardiff Letting Agents & Property Managers | Delivering Double Digit Net Property Returns

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    Thanks for your insights from your local area.

    The story just highlights the importance of doing due diligence on rental demand and levels of HMO saturation. There will be many places where HMOs are still a sound and profitable strategy.

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