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  • HMO & Multi-Lets

    Good Resource For All Round General Advice About HMOs?

    Hi All
    I have a brand new 3b townhouse in Manchester that I have decided to turn into a HMO to ensure that the mortgage is covered. This is my first HMO (and probably my last!) so I would appreciate advice about a good resource for HMO landlords so that I can get advice about all aspects of operating an HMO. For example, I've read that some landlords make the tenants pay the utility bills. I always thought that with HMOs the landlord paid all the bills so I need to know how that works. Who pays the council tax? I want to provide broadband so I would like to know a popular choice with landlords. I assume that the line is barred for outgoing calls except emergency calls. Reasonable utility suppliers, cleaning of the property, etc.

    I don't know all the questions that may arise so that's why I'm looking for a good resource that will provide the answers to everything I need to know to get this off to a good start without making costly mistakes.
    I've just had the house fully furnished by a company recommended by Vanessa but I feel there are additional utensils that are needed so I've started making a list. Again, I hope to find a list of additional things that HMO landlords provide. I do not rent to DSS so the tenants will either be mature students or working professionals. I like to provide good quality accommodation to attract good quality tenants so I'm happy to provide extras.
    I'm also interested in finding out from other landlords what they've found more workable in terms of tenant mix i.e. all women, all men or a combination.
    Crystal
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    Hi Christal,
    I try to go through your questions point by point.
    1. Good resources
    I would advice to read the councils website (see Environmental Health Department). If you have a 3 bedroom house and rent out 4 rooms, than you will not need a license unless the council operates an "additional" or "selective" licensing scheme.
    2. Paying bills
    This depends if you get a group of tenants in or let room by room. A group can share the bills between them as they move in and out in the same time, for example students. If you rent room by room tenants will move in and out whenever and dividing the bills in a fair way might be a bit tricky. It might be easier to include the bills in this case. To avoid tenants being careless and wasting too much energy, some landlords ask the tenants for contributions to the bills should they get over a certain amount.
    3. Council tax
    Students are exempt. For professionals it's up to you. I would include the council tax if all the other bills are included as well. That way you can be certain it will be paid bearing in mind tenants move in and out at different times. If you would mix students and professionals, than 50% council tax has to be paid for one professional, 100% for 2 or more.
    4. Broadband
    It's up to you, but I provide broadband as a standard. To me is as essential as water, gas and electricity. I use virgin and provide the wireless only. All tenants have mobiles nowadays and have never complaint about the lack of a landline.
    5. Cleaning
    I would not provide it for students, but consider it for professionals. A cleaner for the communal areas will cost very little, keeps your property reasonably clean, avoids friction between the tenants ...So if you can ask for an increased rent as well, I think it's something to go for. You can also check with some local LA's if there is a demand for this and if tenants are prepared to pay a little more etc.
    6. What to provide
    I have kitted out all my kitchens completely for the students with stylish, but inexpensive stuff (glasses, cutlery, pots and pans etc.). I also provide toaster, kettles and microwaves. Many LL don't do it because it needs to be PAT tested. On the other hand, if you have a variety of people living there and they all bring their own stuff it could get a bit cramped.
    I feel it's important to provide a fridge and freezer in the appropriate size, so each tenant has his/her own shelf at least. For a professional HMO I would consider adding small fridges in the bedrooms. I also provide dishwashers for the students as it 'sells' the property, avoids friction, keeps the place a bit nicer...Students are not that great with the washing up but just about manage to fill the dishwasher.
    Also important is providing enough cupboard space. They will probably all do their own food shopping and cooking and it has to be stored somewhere.
    I hope this helps.

    Angela
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    Crystal,
    As this is a 3 bed town house, does it not come under the banner of a multi-let as opposed to HMO?
    An HMO is, as a rule of thumb, "five or more unrelated people in a house of three or more stories". It would be worth speaking with your local HMO Officer to find out if you require a licence.
    You can order most of what you need from https://www.grattan.co.uk - they offer nothing to pay for six months and interest free credit for a long period, so it's a great way to spread the cost.
    With regard to tenant mix, I think a house of all females and all males work well. However, when you interview tenants, ask them what they would prefer to get a feel of the people you could put together.
    Always get next of kin details for each person - this is incase they disappear, become seriously ill, or go AWOL, as has happened to myself and other Landlord's.
    We had a chap who had a mental breakdown and disappeared from the house for two weeks without taking his keys, wallet, or mobile phone. He was later found wandering around Heathrow Airport and was "sectioned" by the police and put in a mental insititution! We had no one to call to let them know what had happened.
    Another LL I know had a tenant who was taken seriously ill after having a severe allergic reaction. He had to call an ambulance, and the tenant was rushed to hospital. The LL had no idea what had happened to him - whether he was even going to live or not, and no one to call to let them know or to find out what was happening and if/when the tenant would come back.
    Also ask prospective tenants if they have any medical conditions or are on any medication i.e. diabetic. I think that LL's have a right to know, so that we know what to do if they are taken ill.
    Be sure to state on your tenancy agreement that the room is single occupancy. Otherwise, they move in and then a few nights later the boyfriend comes to stay, and then that escalates into them moving in, which is not fair on you or the other housemates. You can take couples, but charge extra. I think couples can upset the dynamic of a house though.
    I also put in the tenancy agreement that they are key-holders and are not allowed to copy the key for someone else. I had a girl who copied the key to the house and gave it to her boyfriend. He started turning up at the house a 3.00 in the morning drunk, and waking up the other house-mates.
    Schedule a monthly meeting where you meet with the tenants for a cup of tea and sort out any problems they are having. It is far better to have an open and honest forum for discussion than let problems fester and escalate.
    Forbid smoking in the house. Put a bucket with some sand outside the backdoor for cigarette butts, otherwise they will be dropped all over the garden.
    Have a notice board in the house with the rules of the house to remind everyone. Make it clear that your only agenda is to provide a pleasant, clean, and respectful ambience for all.
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    My understanding is that it is not a legal requirement to test portable appliances, but you are responsible as a LL for all appliances provided to be safe. So it's best to test them.
    See https://www.landlordzone.co.uk/electrical_safety.htm
    "...There is no statutory obligation on landlords or agents to have professional checks carried out on the electrical system or appliances. However, under the Electrical Equipment (Safety) Regulations 1994, the Plugs and Sockets etc. (Safety) Regulations 1994, both of which come under the Consumer Protection Act 1987, there is an obligation to ensure that all electrical equipment is safe...."
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    Just to clarify: Every multilet is an HMO.
    The difference is that HMO's can be
    a) licensable or
    b) non-licensable.
    If licensable it will be because they fall under:
    a) mandatory licensing (5 tenants and 3 storeys)
    b) selective licensing (if the council runs that scheme) or
    c) additional licensing scheme (if the council runs that scheme)
    4 tenants on 3 storeys will form a non-licensable HMO unless the council runs additional or selective licensing schemes. As always, ask the council.

    With regards to the bills I agree with Roberta that no matter if you include or exclude the bills, sharing has to make financial sense to the tenants. The overall cost to the tenant should be lower than the overall costs of renting a same standard and location studio or 1 bed flat. However, that does not mean they have to be included. If you get a group in for example students, work placements, co-workers ...you make your life a lot easier leaving them to sort the bills out. No worries about how much energy they use. All their problem. But as I said before, it depends who you'd like to attract.

    Angela
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    Great post Angela.
    To add to the post an HMO includes a 4 unit building where all units are self-contained, 1 bedroom flats and 2 units are rented IF and only IF the building was converted before 1991.
    Other buildings will be an HMO as the above is only an example of something few would recognize as an HMO. The trigger is tied to the conversion prior to 1991's change in the fire code and the percentage of units rented (greater than 1/3 of the building). The example is not what people mean when they say multi-let yet it is an HMO by UK law (not a local council decision).
    John Corey
    Follow me on Twitter -> https://www.twitter.com/john_corey
    https://www.ChelseaPrivateEquity.com/blog
    Angela O'Connor said:
    Just to clarify: Every multilet is an HMO.
    The difference is that HMO's can be
    a) licensable or
    b) non-licensable.
    If licensable it will be because they fall under:
    a) mandatory licensing (5 tenants and 3 storeys)
    b) selective licensing (if the council runs that scheme) or
    c) additional licensing scheme (if the council runs that scheme)
    4 tenants on 3 storeys will form a non-licensable HMO unless the council runs additional or selective licensing schemes. As always, ask the council.

    With regards to the bills I agree with Roberta that no matter if you include or exclude the bills, sharing has to make financial sense to the tenants. The overall cost to the tenant should be lower than the overall costs of renting a same standard and location studio or 1 bed flat. However, that does not mean they have to be included. If you get a group in for example students, work placements, co-workers ...you make your life a lot easier leaving them to sort the bills out. No worries about how much energy they use. All their problem. But as I said before, it depends who you'd like to attract.

    Angela
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    John Corey 


    I host the London Real Estate Meet on the 2nd Tuesday of every month since 2005. If you have never been before, email me for the 'new visitor' link.

    PropertyFortress.com/Events

    Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.

    Wow! I want to say a personal thank you to each of you for taking the time to provide invaluable advice. I wasn't aware that there is a broadband only service so I will order that.
    I went to the landlord show last week and spoke to the rep of RLA and he clarified some points and I will be getting a coin box fitted for the washing machine. There is so much to learn!
    The ad has generated quite a few enquiries so it will be rented out real soon.
    Thanks again everyone I really appreciate it!
    Crystal
    REI said:
    Great post Angela.To add to the post an HMO includes a 4 unit building where all units are self-contained, 1 bedroom flats and 2 units are rented IF and only IF the building was converted before 1991.Other buildings will be an HMO as the above is only an example of something few would recognize as an HMO. The trigger is tied to the conversion prior to 1991's change in the fire code and the percentage of units rented (greater than 1/3 of the building). The example is not what people mean when they say multi-let yet it is an HMO by UK law (not a local council decision).John CoreyFollow me on Twitter -> https://www.twitter.com/john_coreyhttps://www.ChelseaPrivateEquity.com/blogAngela O'Connor said:
    Just to clarify: Every multilet is an HMO.The difference is that HMO's can bea) licensable orb) non-licensable.If licensable it will be because they fall under:a) mandatory licensing (5 tenants and 3 storeys)b) selective licensing (if the council runs that scheme) orc) additional licensing scheme (if the council runs that scheme)4 tenants on 3 storeys will form a non-licensable HMO unless the council runs additional or selective licensing schemes. As always, ask the council.With regards to the bills I agree with Roberta that no matter if you include or exclude the bills, sharing has to make financial sense to the tenants. The overall cost to the tenant should be lower than the overall costs of renting a same standard and location studio or 1 bed flat. However, that does not mean they have to be included. If you get a group in for example students, work placements, co-workers ...you make your life a lot easier leaving them to sort the bills out. No worries about how much energy they use. All their problem. But as I said before, it depends who you'd like to attract.Angela
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    Tangent but a partial answer to Nick's question:
    Very common with properties in the US where there are multiple residents using a common set of machines. An apartment building (not multi-let in any way, shape or form) with a laundry room so people have shared machines. Many times you just hire an outside company to run the machines, deal with maintenance and they share the revenue with the building owner. The self-contained units are normally too small for individual machines in each unit. The US does not like small stackable units compared to industrial sized machines or family sized machines in a common facility.
    Very similar in economic terms to having vending machines in an office building where the workers from various employers can buy snacks.
    Machines in individual units increase the maintenance load and are harder to service as you need the tenant's permission to enter. If the units are in a laundry room having 1 break is much less of a hardship to the tenants and easier to repair or swap out. The US does not use combo units where the wash and dry happen in one machine. Hence there would always be a washer and a dryer so two loads can be in process as once. When in the actual rental unit they will commonly be set up side by side in a laundry closet. Never in the kitchen.
    John Corey
    Follow me on Twitter -> https://www.twitter.com/john_corey
    https://www.ChelseaPrivateEquity.com/blog
    Nick Parkin said:
    Coin Box on the washing machine! Ye gods - why?
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    John Corey 


    I host the London Real Estate Meet on the 2nd Tuesday of every month since 2005. If you have never been before, email me for the 'new visitor' link.

    PropertyFortress.com/Events

    Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.

    Hi Vanessa
    I've now checked with the local council and you're right - it is a multi-let as there will be a maximum of 3-4 tenants living in the property and therefore does not need to be licensed.
    Crystal
    Vanessa said:
    Crystal,As this is a 3 bed town house, does it not come under the banner of a multi-let as opposed to HMO?An HMO is, as a rule of thumb, "five or more unrelated people in a house of three or more stories". It would be worth speaking with your local HMO Officer to find out if you require a licence.You can order most of what you need from https://www.grattan.co.uk - they offer nothing to pay for six months and interest free credit for a long period, so it's a great way to spread the cost.With regard to tenant mix, I think a house of all females and all males work well. However, when you interview tenants, ask them what they would prefer to get a feel of the people you could put together.Always get next of kin details for each person - this is incase they disappear, become seriously ill, or go AWOL, as has happened to myself and other Landlord's.We had a chap who had a mental breakdown and disappeared from the house for two weeks without taking his keys, wallet, or mobile phone. He was later found wandering around Heathrow Airport and was "sectioned" by the police and put in a mental insititution! We had no one to call to let them know what had happened.Another LL I know had a tenant who was taken seriously ill after having a severe allergic reaction. He had to call an ambulance, and the tenant was rushed to hospital. The LL had no idea what had happened to him - whether he was even going to live or not, and no one to call to let them know or to find out what was happening and if/when the tenant would come back.Also ask prospective tenants if they have any medical conditions or are on any medication i.e. diabetic. I think that LL's have a right to know, so that we know what to do if they are taken ill.Be sure to state on your tenancy agreement that the room is single occupancy. Otherwise, they move in and then a few nights later the boyfriend comes to stay, and then that escalates into them moving in, which is not fair on you or the other housemates. You can take couples, but charge extra. I think couples can upset the dynamic of a house though.I also put in the tenancy agreement that they are key-holders and are not allowed to copy the key for someone else. I had a girl who copied the key to the house and gave it to her boyfriend. He started turning up at the house a 3.00 in the morning drunk, and waking up the other house-mates.Schedule a monthly meeting where you meet with the tenants for a cup of tea and sort out any problems they are having. It is far better to have an open and honest forum for discussion than let problems fester and escalate.Forbid smoking in the house. Put a bucket with some sand outside the backdoor for cigarette butts, otherwise they will be dropped all over the garden.Have a notice board in the house with the rules of the house to remind everyone. Make it clear that your only agenda is to provide a pleasant, clean, and respectful ambience for all.
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    Well done Crystal. Hopefully that bit of information has saved you quite a lot of money and hassle?!
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    Crystal,
    Legally, the property is an HMO if there will be more than 2 unrelated tenants living there. A 2 bedroom flat can be an HMO.
    There are 5 possible HMO types and the number of tenants is not a determining factor in all 5 types. In one case all it takes is 4 self-contained flats with 1 person living in each if the building is more than 50% rented and the building was converted prior to 1991.
    That said the fact the subject property does not need a license is important and could be a blessing.
    Make sure you update the property to fit all the code requirements. As Jim H notes when he speaks, there is very little difference in the code between a fully compliant BTL rental and an HMO.
    Good luck with the property.
    John Corey
    Follow me on Twitter -> https://www.twitter.com/john_corey
    https://www.ChelseaPrivateEquity.com/blog
    Crystal Diamond said:
    Hi Vanessa
    I've now checked with the local council and you're right - it is a multi-let as there will be a maximum of 3-4 tenants living in the property and therefore does not need to be licensed.
    Crystal
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    0

    John Corey 


    I host the London Real Estate Meet on the 2nd Tuesday of every month since 2005. If you have never been before, email me for the 'new visitor' link.

    PropertyFortress.com/Events

    Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.