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  • HMO & Multi-Lets

    Micro-HMO's?

    Paul made an interesting post here which got me thinking:

    http://www.propertytribes.com/showthread...lid=275283

    Does anyone have any 2-bedders that they're renting out to 2x couples and if so, how's it working out?

    I've been going over it in my mind and I'm not sure 2x couples would be able to share facilities without one couple trying to be the dominant one and forcing the other out.

    If there were 4 people in a normal HMO and one moved out at least you'd still have 3/4 of the money. If one couple moved out then you're down to 1/2 rent and the potential for the same thing to happen again once another couple is found.

    Ok those are potential negatives, but is anyone making the strategy work?

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    You raise some important points and to some extent I have an easy set of circumstances which may not be available to other micro HMO LL

    That is my properties have TWO bathrooms!

    So whilst they share the kitchen/diner they are NOT sharing a bathroom

    Now one is an en-suite without a bath, the other is a full larger bathroom

    Now I'm not sure how attractive such a property would be if there were two household couples sharing one bathroom!!!?

    That absence of a second bathroom may well destroy the whole idea of a micro HMO unless there are two separate bathrooms.

    Most two bed terrace properties don't have a second bathroom or even the ability to have one installed.

    This must surely be a major mitigating factor against a micro HMO strategy

    I appreciate that in desperate circumstances with rental property shortages sharing a bathroom is not the end of the world if there are only another couple to contend with in the bathroom rush!!

    I appreciate it is not an ideal solution as far as living arrangements are concerned but needs must and beggars can't be choosers and all that.

    My sharer tenants found each other via spareroom from my advert.

    One of the couples made a conscious choice to share

    They could have afforded a property on their own but that would mean an inability to save for a deposit for their aspiration of home ownership

    So they have determined to sacrifice certain domestic arrangements to achieve their ultimate objective

    The other couple simply couldn't afford the property on their own.

    They didn't want to be in a large HMO.

    They like the almost private circumstances of a flat share.

    From my experience to date they share the common areas without any issues .

    I have also laid down the law to them that they are to respect each others circumstances and that ultimately I will decide who stays or goes after having mediated as much as I can

    I have advised that it is in none of our interests to have discord.

    They fully agree with those sentiments and they have experience of multiple living arrangements.

    They advise they know how to behave.

    So I have confidence that they will make a good set of sharers

    However if one couple chooses to leave I know I won't have any problem sourcing replacement sharers or sharer via spareroom.

    As a way to avoid the issues of HMO licensing this most efficacious micro HMO strategy seems to make sense to me.

    It is almost a plain vanilla single let but not quite.

    The downside I have though is I don't have additional income from sharer tenants as I charge the same for two couples as two singles..

    Usually the point of an HMO is to earn more rent out of a given footprint of a property..

    However I find it easier to achieve higher market rent with two sharer couples than possibly struggling to achieve top rent with one set of tenants.

    There are possibly many other issues that I have not considered as far as my micro HMO strategy is concerned

    A major factor for me is that currently it seems this strategy will not raise the ire of the local council who I detest with all my being.

    I do not want them interfering in my business.

    It also means I am not in breach of lender conditions.

    With a two bed it is hard for tenants to have illegal occupiers which is a major concern of mine.

    We LL will always be the bogeyman irrespective or how efficaciously we attempt to manage our tenancies.

    I don't wish to inadvertently become an unlicensed HMO LL  because of such illegal occupiers.

    As far as rental income is concerned

    I accept I won't receive much more if at all than a plain single let.

    But I know if one half of the tenancy departs I should be able to source replacements

    So yes a void during which you are receiving half rent even though I have a joint tenancy

    I would not charge full rent to the remaining sharers.

    .One of my sharer couples has already advised that should the other couple wish to vacate they could easily source sharers who would invariably be associates of theirs who would meet my requirements.

    I accept that this is a people business and having such sharer couples does impose  possibly stressful dynamics on the situation

    But hey if you want such sharer circumstances you have to accept that there maybe issues!!

    Ideally of course I would prefer to have single lets with one household.

    But rent costs are invariably just too expensive for tenants on a single let.

    So the micro HMO arrangement seems to me an ideal solution for LL and tenants alike.

    There are many strategies in the PRS, this one of mine is one that currently works for me.

    I also use the strategy of allowing tenants to take on a lodger with the acceptance by the tenants that if the lodger doesn't pay them they are STILL responsible for the FULL AST contractual rent.

    I haven't experienced any issues using this strategy either.

    Yes people come and go, but I find my flexibility is appreciated and usually everything works out.

    I'm sure that many LL could pick lots of holes in what I currently do.

    But like any LL you choose how to do things and if it works for you than it isn't really wrong!

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    Hi Paul

    I apologise for my ignorance, as I'm new to all this and just beginning my research into the possible mechanisms for property investments. I've seen your posts about micro HMOs but I don't see how renting just two rooms makes it not an HMO? I came across a description of what constitutes on HMO Network and it's defintion is "An entire house or flat which is let to 3 or more tenants who form 2 or more households and who share a kitchen, bathroom or toilet"

    Are you suggesting that because the number of people is less than five, there's no need to license and therefore that's the benefit? If so, I assume that the government's discussion about making HMO licensing mandatory may put a spanner in the works?

    Many thanks

    Tony

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    The issue of what will constitute an HMO for licensing purposes hasn't been determined yet by Govt

    They are currently considering what will be a licensable HMO

    So whilst my set up might be considered an HMO it won't be licensable as far as the new regulations are concerned.

    It is very much a case of waiting to see the outcome of Govt deliberations over this issue.

    There maybe a situation where though not normally licensable Govt will allow councils to require a selective HMO licence for the scenario you quote.

    So yes I am keeping a watching brief on this issue.

    If I am required to licence with two sharer couples without any changes to the property then I guess that is another cost the tenants will be paying extra for

    Though for mortgaged LL the major factor will be that a set up like mine being determined an HMO means I would be in breach of lender conditions!

    A bit galling for them as they are trying to reduce costs by sharing!!

    After S24 I expect the Govt to come out with all manner of bizarre rulings.

    We wait and see!!

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    Pauls is an interesting strategy and I'm still trying to get my head around it completely!

    If both couples are married then it would still be an HMO as it's 2 families?

    According to the HMO page on the .gov.uk site:
    " A house in multiple occupation is a property rented out by at least 3 people who are not from 1 ‘household’ (eg a family) but share facilities like the bathroom and kitchen. It’s sometimes called a ‘house share’. "

    I guess it's all down to local councils who could throw a spanner in the works.

    What about having 2x kitchens to get negate the shared facilities ruling?

    Couldn't the rent be worked out as 1.5 times each single persons rent? That would make more sense to me as there's twice the wear and tear happening.

    If it were rented to 2x individuals who's to say that under normal circumstances another boyfriend/girlfriend may practically move in anyway so it'd be 4 people whether you liked or not.

    Interesting proposition though.

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    I believe the whole HMO proposition has been thrown completely up in the air.

    With the Govt review and councils coming out with different ideas no HMO LL or even any LL who doesn't consider themselves to be one can really know how things will turnout.

    It could mean changing business model or selling up or changing room arrangements

    There are so many uncertainties currently it is a case of just waiting to see what Govt decides

    I believe many LL including myself could be caught out by these HMO changes.

    I am certainly NOT complacent and I am not that arrogant to believe my business model could not be severely upset by the potential revisions to HMO legislation.

    Consequently I am monitoring what other LL and industry professionals are saying

    Keeping up with PT postings assists me greatly.

    In extremis it maybe I am forced to source single let tenants

    This will he a struggle especially when more rent needs to he charged to cope with S24, increased SC, normal annual rent increases.

    It could be that even the single let business model becomes unviable and with the potential increased costs of HMO licensing as a way to let the properties out viably the whole model collapses.

    We are in uncharted territory and the thing I do know is that I don't know what is going to happen next

    I guess any LL not using a single let business model will be in the same boat.

    I am just hoping I don't get sunk!!

    Councils are also causing problems with what constitutes appropriate room sizing.

    I guess if by having two households comprising of 3 or more people was officially designated as an HMO and required a licence I would have to give notice to a couple as my mortgage is NOT an HMO product!

    I would then be forced to retain the existing 1 tenant and source another single tenant.

    This then leaves me under the possible HMO threshold.

    There are so many machinations as to what might need to occur I confess I haven't a clue how things will play out.

    I guess we will all know fairly shortly when Govt announces the results of its consultation process!!

    I wouldn't suggest anyone follow what I currently do as a pro forma way to proceed.

    I fully accept my business model could be collapsed by the Govt regulations on HMO.

    Plus being an MX client I have to ensure that I do not give them an excuse to call in the mortgages!

    Operating as a new official HMO when my mortgage product doesn't allow HMOs is just asking for trouble!!!

    So it is with some trepidation that I await for the Govt announcement of what they have decided are to be the new HMO requirements.

    Based on what they have done on S24 I fully expect their announcements to be completely bonkers!

    Putting many LL with 2 or more households comprising of 3 or more people in a very precarious position.

    We could see many LL having to boot out decent tenants just to avoid becoming an HMO under the new regulations.

    All in all not a happy state of affairs and one that I am very concerned about.

    However there is nothing I can really do until I know what the new regulations state.

    My understanding of HMO legislation is it has been more to do with fire regulations etc

    I honestly cannot see why two couples in a purpose built normal residential property should be considered an HMO and possibly being subject to a myriad of regulations whereas a family of say a couple and two kids would not be considered the same fire risk!

    I guess there is more to HMO considerations than just fire regulations though I can't see why two households of no more than 4 people are a blight on an area than a normal family.

    But hey what do I know,!!!?

    Anyway we await to see what bonkers ideas the Govt and Councils come up with next!

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