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  • HMO & Multi-Lets

    First time investor

    Hi All,

    Im looking to get on the property ladder and i am consider to get into HMO's. I have a good amount of saving and think its more exciting then just your standard BTL, i have seen a few videos online (Mainly YouTube - "Samuel Leeds"Wink but i was hoping to get any information which i would need before i could consider this move etc. I have around £100k mark to start and i have a decent job/income.

    Do i need to register with the council and get a license?

    Do you need planning permission to convert living space into a room?

    Any ideas in up incoming areas?

    Oscar

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    Ugh I severely distrust/dislike Samuel Leeds, there have been some negative stories around him so take what he says with a severe pinch of salt.

    It depends on the areas what the requirements are and will also depend on size of property/number of occupants. You don't need planning permission to convert a living space to a bedroom however keep in mind that there is guidance around room sizes and living space in an HMO, you may struggle if there is a small kitchen and no other communal area.

    I think HMOs can surely be a good earner however do your sums as the cost of cleaners, paying the bills, council tax can all stack up to make some HMOs no more profitable than a vanilla BTL. You can expect higher voids and tenancy turnover as well as maintenance costs. None of this is to say great HMO opportunities aren't out there, but don't just fall for headline rates. One thing I nearly got stung on in a purchase was finding out that Reading Borough Council Tax department were charging full council tax for each bedroom that had an en-suite that resulted in a purchase falling through because it eroded the profits. Because of all of the above we're deciding to go for standard BTL over HMO.

    Edit: And whatever you do, don't pay through the nose for some course that will just fill your ears with "inspirational" stories!

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    Just as Richard S. mentioned to whom I agree with.  Don't run before you can even crawl.  This(HMO) is like running like Usain Bolt on speed.

    Running an HMO now a days requires lots of Regs. to follow and one thing out of place could end you up with a fine up to £30k and there are some 29 of them.  Being caught in two of them will wipe you out of business unless you are millionaire.

    Yes it looks lucrative but no one has become a millionaire overnight except winning the lottery or inheriting it.  When you want £m in a night you end up disrespecting money.

    I did a HMO one day course run by a well know association where the HMO trainer said he wouldn't get into HMO. Although he as perfect knowledge he will not go into it.

    Then I did a small intro day where I found they said almost the same thing it is hard and can be done but you need to know what to do correctly.

    Have you been to any talks seminars even where they talk about it.


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    I'd agree with the above comments - do spend time educating yourself and doing research. The yields are high for a reason: there is a lot of work, risks are higher, regulations are more stringent and so on. The good place to start would be:

    1. Read a local council HMO policies and HMO Licence requirements. It should give you a pretty good idea of what you are stepping into in terms of things to get right and monitor.

    2. Go on 'Spareroom', the first search of the number of HMOs advertised, then on the number of rooms wanted. This should give a very basic idea of supply/demand. There would always be more rooms, the question is by how much.

    3. Do you plan to manage it yourself? Does your job allow you to visit your property anything between 30-60 times a year? If not, are there good HMO letting managers in your area? Talk to them, they are usually a good source of advice and could help to set the expectations. Choose the area you could drive to under 40 minutes unless you plan to hand it to a letting manager. Note high street agents won't take HMO, so you'd need to find good local guys.

    4. Talk to a good mortgage broker. You're unlikely to get an HMO mortgage before conversion, so you'd be looking at bridging and refinancing. That's quite a cost.

    Good luck with your journey!


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    Good point Olga, regarding point 4, but there is also another point that not many people appreciate.  Many lenders will not grant a HMO mortgage to a first time landlord; they would like to see at least some experience (anything between 6 months to 3 years).  So there would be an extremely limited mortgage market for a first time HMO landlord.

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    Very true, I guess one has to go through the pains of bridging at least once until there is a proof of experience. Or buy an existing HMO.

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    1st advice do not do it now as beginner please as I said unless you have millions and can hire a consultant and leverage team to give you guidance and even after that as a owner you will be liable for all the flaws not the agent who advised you so as they say Knowledge is power.

    Do B2L and progress into HMO at a later stage.  If you are looking for quick cashflow then FLIPs are a good start. For B2L look for high yield London will definitely will be not it.

    Another thing reminded by Olga thanks Read on the local council HMO reg as they will differ on the Gov website and also read on the LACoRS guide as well.

    As a side kick I have a what I thought was a straight B2L property. But now council decided it to be a HMO and not having no or minimal knowledge of how to manage it and cost is another side of it, I have decided to sell it off and start fresh.  And first thing I will be looking at is Flips and/or deal sourcing which I learnt at one of the free seminars. Even this looks simple but there is an art to it so I have to refine it and earn my way up(Hopefully).


    So please think before you jump.

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    I agree with a lot that has been said regarding check on local council rules on HMO licence as all councils differ. That will give you guidelines on compliance to operate as a HMO or if planning permission required. Generally planning permission is not required unless there is an Article 4 in place. Which basically means there are too many HMO's operating in the area and they are tightening the belt on new applicants.

    There is a lot of regs and legislation involved in running HMO so ensure to do thorough research before jumping in

    Good luck

    Benjamin

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    I always liken a newbie getting involved with HMOs as being akin to a learner driver getting behind the wheel of a Ferrari.  You will crash. It is inevitable imho!

    Samuel Leeds is a menace to the property sector, urging newbies into HMOs.  We have many long threads about him on this site - just put his name into the PT search engine to access them.

    Samuel's "advice" is at best very lacking in detail and at worst downright irresponsible.  It is clear from his videos and his content that his knowledge of HMOs is cursory and he should not be in a position to give unregulated and uninsured advice, but unfortunately, there is nothing to stop him - other than community safe-guarding.

    Standard occupancy BTL might not be "exciting" but it is steady and safe and you can "learn on the job" with less risk of crashing into a wall.


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    Hi all,

    Many thanks for the swift replays after reading into more depth i believe i will go for a standard BTL and look for high % ROI. Although yes i guess the money in HMO's would be more but so would the work also.

    Also im looking to get a warehouse BTL valued at £200k im struggling to find a broker who can assist, i have 25% deposit and have a decent own personal income.

    Would anyone know of anyone who could potentially help?

    Kind regards,

    Oscar

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    Also on the note of Samuel Leeds,

    I have seen some post in and around his business and practice and if im honest i think Vanessa gave the best response in regards to allow people to do their diligence before committing and investing etc. I do believe in a way what he is saying and his business plan could work, but this

    would be for those who maybe have capital to maybe risk and can afford etc. The idea of getting a property for nothing and magically earning you passive income is differently hard to believe but deferentially not 100% impossible either.

    Kind regards,

    Oscar

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