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(*Moderator note: This thread has been created from thread drift on another HMO discussion as it went off-topic and deserved it's own thread*).I really cant understand HMO
If you are going to this level of service why not run a hotel
your 99% of the way there with this sort of thing
HMO is the most hated sector of GR
Rent Control would kill this off
Learn Change and Adapt ?????
It is interesting that you suggest your HMO will still cash flow effectively even if suffering a £5000 hit from ICTB.
That suggests you have considered these recent circumstances in your business model.
Do your properties comply with room sizing and could your cash flow still be viable with rent controls!?
I guess because you seem to be operating high end HMO that you would survive.
Even if you suffered another £5000 hit from rent controls you would still be doing better than a single let.
However you are in a minority when operating HMO
Few HMO operators will be as resilient as you.
Most of them are operating in the lower end of the market and would struggle with ICTB and rent controls.
Clearly having a quality offer gives you a resilience all of its own.
Your business model for HMO is I consider the safest one.
I'd rather have one or your high end HMO than 2 lower end ones.
I believe that with all the attacks on the PRS that there will inevitably be a flight to quality.
That is where the resilience is inbuilt.
Those who rely on lower end offerings will suffer as LL continue to abandon what will ultimately be an unprofitable sector.
A quality HMO which has to be of mini - hotel standards will always cash flow brilliantly.
It has been the lower end of the HMO market that has caused so much grief from councils.
This has affected all HMO even the best ones
I doubt once ICTB and rent controls have been factored into a HMO business model that those HMO would be viable.
For LL such as you dealing in the higher end of the market I doubt these issues will cause you much concern
OK so you could lose £10000 IF ICTB and rent controls hit.
So what you are still cash flowing nicely even after that which makes the business still viable though perhaps less profitable.
But it won't put you out of business which is what could easily happen to LL operating lower end HMO
You two comment a lot in the HMO tribe but (as far as I am aware) you do not have any HMOs and have no experience of running one? At least that is what I would gather from your dislike of HMOs and some of the things you seem to say?
I have an agent - my figures are after agents fees. In any case, it is far from managing a hotel. You are not checking people in and out every day. You are checking people out every 6 to 12 months. That is circa 175 to 365 less check ins PER ROOM and you are not cleaning the rooms, running a reception, and a restaurant. That was a ridiculous statement to make.
Is it the case that you just don't like the profitability of the HMO sector because you are not part of it? The fact is that standard BTL is barely profitable at all now and many will start making losses. This is why people are leaving the BTL sector, selling up, and mortgage applications are dropping. They just don't clear enough money to deal with problems such mortgage interest relief and, yes, possible rent controls and additional regulation and licencing (it is not just HMOs!).
As regular contributors I feel that we have some responsibility for giving people an overall, objective, picture of something we understand. It is important that people are not mislead by sweeping statements and misunderstandings.
When you make statements, for example regarding rent control, you have to make sure you understand what you are talking about. Rent control (if brought in) is likely to only affect certain localities, and those are most likely to be in London.
I welcome legislation and regulation. Bring me more off it. None of what has been brought in is hard to comply with but might seem like it is to those who are too risk averse (not a bad thing) to become involved in HMOs and are looking in from the outside. This way the market will be left to those who know what they are doing and will be even more viable. Councils were already mostly asking for 6.5 sq m rooms for *unlicensed* HMOs before this new regulation came in for example. It was in the Housing Act. However, do not under estimate a lot of people who have become involved in HMOs. Many of them do know what they are doing and are doing it carefully. They also have the exit strategy of putting the property to a standard BTL, thereby putting themselves alongside the standard BTL sector.
My conclusion as someone who is involved in all sectors is that the HMO market is the most viable passive rental sector in residential, and will continue to be so for quite some time. However, it is not for the feint hearted or people who want a simple portfolio.
Rural Practice Chartered Surveyor. Experienced in estate management, residential investments, planning and development and rights for utility apparatus. 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.
Ben I have great experience as a Landlord over 30 year and mostly have a larger Business then most
I also looked at HMO over 25 years ago and I have a couple of friends who are HMO landlord both of who I respect and value there input when I ask questions about regs ect
I also worked in Local Govt in Housing and I can tell you from first Hand experience that Councils Hate HMO
The reason they are hated was due to the attitude of HMO Landlords and the problems there customer base bring to the area
You know how much regulation there is in your sector and believe me the Town Halls love to enforce the Regs and charge for the fact
Newcastle City Council do not want the services of HMO and they have made it quite clear I have sat in NLA meetings with the Council and seen first hand how the Council treats HMO Landlords
The Councillors of the areas hate them and so do the residents
You may not like my views But they are honest views
I see the work that good HMO Landlords do
But I also see why the Regs are getting tighter and tighter
If you listen to Generation Rent they hate the sector
They hate the fact they have no option but to live in a shared house
and who can blame them really
To share a Kitchen and Bathrooms and a living room is from the dark ages
very few of use would pick it out of choice
It doesn't matter how you dress it up its a doss house and that how the public see it
it may be a 5 star doss house but it is what it is
The Govt and Councils and GR are on your path and I don't envy the route you are treading
Public Opinion is against all BTL in general and HMO is top of that list.
"I also worked in Local Govt in Housing and I can tell you from first Hand experience that Councils Hate HMO" - Not the case in the two local authorities I work with. They are supportive and value the sector.
"The Councillors of the areas hate them and so do the residents" - not the case in the two local authorities I work with.
"If you listen to Generation Rent they hate the sector" - they hate the BTL sector too.
"To share a Kitchen and Bathrooms and a living room is from the dark ages" - modern HMOs are en suited
"very few of use would pick it out of choice" - possibly as with renting normal BTL
"it may be a 5 star doss house but it is what it is" - I don't know where to start with this one
As I say, if you do it well, all the things you are worrying about are much less of an issue.
The problem for mostly the lower end of the HMO market is those LL are intensely disliked by councils.
You and others dealing in higher end HMO have a viable business model even if a couple of more things are chucked at.
Such HMO passive income can be easily eaten away.
But with higher end offerings you should survive albeit with reduced passive income that is probably still better than single let's
However it is perfectly possible to let out a purpose built 4 bed house achieving the same rent as an HMO with 4 beds.
You just have one AST at the same price as a 4 bed HMO and then add or remove names from the AST as needed.
There will be many LL reducing their properties to 4 occupiers only
It is perfectly possible to have changing tenants on one AST.
The mere fact that all a LL needs to do is buy a purpose built 4 bed property and then just charge an equivalent or just under rent that a 4 bed HMO will charge will undercut the HMO business model.
No improvement required at all
Just a bog standard house with tenant sharers
I predict 4 bed houses will be in much demand or 3 bed ones where a loft conversion could occur though I have an idea that would make such a property 3 storeys and require normal mandatory licensing even if only 4 occupiers over 3 storeys.
I predict this HMO licensing thing is going to become very complicated and is going to confuse the hell out of many LL.
Just shows the difference between councils
But Maybe they need your services for the time being
I know as a Home Owner I would not be happy having and HMO next to me
I don't think I am alone with this situation
HMO is not a loved sector and if the Councils can make money from the sector they will and are
It is clear from this thread that councils have different attitudes to HMO.
Councils can change political persuasion to being lovers of HMO to haters!
I wouldn't want a business model based on such susceptibility.
LL need certainty before they invest.
I don't trust councils
The May council elections could be a significant turning point for HMO LL.
Labour will win most of them.
Councils are after income.
ICTB would be an easy low hanging fruit to pick.
Many LL could derisk from HMO ICTB by reducing to no more than 4 occupiers in an unmodified purpose built property
It simply won't be worthwhile having 5 occupiers anymore due to the property works and costs involved.
A decent sized 4 bed house is all you will need.
Works as a quasi HMO and conventional single let.
No ICTB risk either.
4 bed houses are pricey.
Round my way up past £380000
Venessa I think you can comment about HMO,s even if you don't own one
The principle of letting is a very old one and be it HMO or single dwellings comparisons are there
I only wish you could meet our local NLA rep and listened to some of the fights he has had with councils
I really don't think its attractive sector to be in
Would you like an HMO next door to your house ?? I think most folk would not be that keen
and that's my starting point with HMO
The other point is would I like to live in an HMO and my answer is no I would not
I can see why a Group of students my like a House share with there friends I am sure that aspect could be fun
But for a limited period in life when your single and care free
To be a worker older in years who is working 40hrs a a week I am not so sure it would be a great thing
If you notice in the Press in the press The HMO sector is always reported in a bad way when they have the chance
I have sat in on HMO forums over the past 20 years and I have listened to a great number of Topics
and I always come away from such meeting that The Council are going to make this as hard as they can and as expensive as they can for Landlords
I personally had a Large House which I wanted to rent to a company who had workers here for 5 years
as a good landlord I spoke to the folk around the doors
Long story short the Council were at my door asking about the illegal immigrants I was housing if I had been starting a brothel I would have had a better response
The Property was empty and the council had a great number of complaints about my supposed change of use
The property was let to a Company but It did not fall under the rules of an HMO and the council were very Happy with what I was doing and it was not an HMO
I am sure I am not the only Landlord who has been treated by folk in the area in simmer ways
The hatred shown to me had to be seen
HMOs are the whipping boy of our sector for one reason or another
so although I don't own an HMO I have been down the road some way of an HMO Landlord
and I wont be going down that road again Venessa
I can do with out trouble in my life so HMO will not be in my plans
Well I chose to move from a flat to a house share - i now let quite a few and with a family wouldn’t consider living in one now. But, I can say 8 years of living in house shares was brilliant. Perhaps, you are are a bit removed from the motivations of this market?
A very misleading title!
Most of us who have rented domestic property have an HMO, unless it is rented to a single person, and are therefore justified in commenting. We then choose whether or not to keep it below the level of occupation that requires regulation - Licensing, Planning, ICTB.
Personally I welcome all comments as it prompts me to check current legislation and make an informed choice.