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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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    _________________________________________________________________________


    My posts are not financial advice but often me rambling - passing time on a coffee break.
    Our team at Bespoke Finance offers Limited Company Buy-to-Let and Cheap Life Insurance.

    _________________________________________________________________________


    Bill's article is spot on imo. The firms involved have make good money by charging a finders fee and a percentage of the refurbishments costs. I am amazed why a landlord would want to pay out a finders fee anyway.

    Yes they are promising milk and honey which is just sales spiel but the investors have to take some responsibility too.

    I find that all are out of the area and do not know the Stoke on Trent market. Eventually it will dawn on them that they have a terraced house in a not the best/poor part of the city that is worth £75k but has cost them £120k. As for the firms involved, I guess make it while you can, can't see many trusting them in the future.

    The HMO highlighted is in Sneyd Green, no big employers and not in the right area, not the place for a HMO!

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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 ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    Would you please share your experiencec

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