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  • Buy-to-Let

    Tell me about buy to let in Nottingham

    Hello, I posted in the HMO forum and didn't get any replies so thought I'd ask about Nottingham here. I'm a first time poster and first time buy-to-letter. It's been a lifelong dream to build a small property portfolio so I'm excited to be making my first step. I'll also (hopefully) be going on maternity leave in the next year, so my first property will be mainly looking at the best ROI, to cover my income drop from that.

    I'm looking for advice on the best buy to let options in Nottingham, eg a family home vs a student HMO and areas for each etc.

    My initial thought was to buy a mini-HMO - something like a three or four bed house to rent to students in Radford, but I was told by an estate agent that the Council now only very rarely give out HMO licenses. So even if you buy an HMO house in Nottingham, you're unlikely to get a licence to run it as an HMO house yourself.

    So my question is does anyone have experience of difficultly getting an HMO license in Nottingham? If so, are there any alternative areas of Nottingham where getting an HMO licence might be an option?

    And if I invest in a non-HMO, what are the best areas to invest for the best ROI on a family home... or to rent to a single post-grad student who could then sub-let rooms on their own?

    I've also been looking at Liverpool as an alternative but would prefer Nottingham. So if anyone also has advice on Liverpool vs Nottingham, that would be much appreciated too. Smile

    Thanks in advance!

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    PS my budget is £180,000 and under - but preferably about £120,000. And I'm happy to do a little work, like updating the kitchen and bathrooms etc (although for my first property, probably not remodeling for individual ensuites etc).

    And this might sound naive but I also have good design skills so, compared to other rentals I've seen advertised, I think I could make my own a little more desirable, if that's any help in attracting renters. I have experience in renovating a dump to a really beautiful space that people love and feel comfortable in (my own flat, based on renters reactions when I previously rented it out for a year)... so while I'm looking at a good ROI, I'm also looking to create a home that people will hopefully enjoy living in.

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    Hi

    I have 5 properties in Nottingham, and whilst I have no experience with HMOs, it does ring a bell that new HMOs are hard to come by. I also think the student market is quite saturated, as the Unis themselves have been building a lot of accommodation recently (a good money spinner), and all those new student 'pods' near Trent.

    From my experience of the housing I have, the sub £100k 2/3 bed places, in not the 'smartest' parts (like Radford) are just not worth it. On paper the yield might look good, but the type of tenants you or your agents may have to deal with, just aren't worth it. Every day of the week, I would buy a £150k place in Sherwood. A great area, with new restaurants and bars opening, decent schools, young families and generally just a great community spirit (& so capital growth potential). Because of this, you should also get a good quality tenant(s) who may well stay more than 12 months. 

    This is naturally just my personal opinion, and hopefully others will give you theirs. I wish you the best of luck with your property journey, and future parenthood!
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    Hi Denim, thanks for getting back to me. I've had a look at Sherwood and the area is great but it looks like you get a relatively low rent in comparison to the price of a house. Prices I've looked at are about £170,000 for the cheapest houses and about £700 rent per month I think. I will be a high percent mortgage, so am looking initially for a higher rental ROI. 

    It's a tricky one as quality of tenants are also important which I why I was initially looking to rent to students.

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    I don't know much about investing in Nottingham, although we have a number of threads on this site on this topic, which you can find by putting "Nottingham" into the search engine - such as:

    Nottingham buy to let 

    Nottingham property blues. 

    However, what does concern me is that you, as a newbie, are considering an HMO!  HMOs are typically the domain of experienced "hands on" investors as there is far more regulation and compliance surrounding them.

    See - When to say "no" to an HMO?

    I would strongly recommend that you consider a single occupancy terraced house to start learning your landlord trade and get used to tenant management.

    Starting out in HMOs is like putting a learner driver in a Ferrari imho ... a crash is very likely!

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    Hi Vanessa, thanks for getting back to me! I do have a little experience as I rented out my own flat for about 18 months, so gained some experience of managing tenancy things like gas and electricity checks, tenant reference and credit checking, secured deposits, managing issues from afar, like broken ovens and new painting jobs needed. I've also managed house shares as a tenant myself (and formerly worked as a facilities manager, so have some experience of organising things like PAT testing).

    The reason why I'm looking at (mini 3 or 4 bed) HMOs is that I have quite a limited budget to get started with, so it's really going to need to be all or nothing to enable be to earn a little more at the start to put back into maintenance and reinvesting to grow a portfolio. Because I will have a high percentage mortgage, I may actually lose money if I go for a family rental. I'd definitely prefer that down the line but initially to get me started I think I'd need a slightly higher return.

    I realise it could be very high maintenance but hopefully I can jump in and manage what's is thrown at me the best I can... I'm thinking pre-arranged handymen, plumbers and electricians on call.

    I realise every UK city has different rules on whether you need a licence for HMO and as more and more cities are adopting selective licensing... so I'm starting to think it might be better to choose a city that doesn't yet have this policy in place. If there's uncertainty about getting an HMO licence to rent to students, the only other option would be families or a two-bed property with a much lower ROI...

    Thanks for the links on Nottingham, I will have a read!

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    An unlicensed HMO still has to comply to HMO standards in terms of safety, fire, escape routes etc - the same as a licenced HMO.  You are also legally obliged to adhere to Management Regulations.  The term mini-HMO is often used by property gurus to make out you can fly under the regulation radar.  That is false.

    I still think going for an HMO would be an exceedingly high risk strategy for you and HMO management companies are few and far between because of the higher turn over of tenants and the extra work involved, not to mention the extra layers of compliance and regulation.

    Before going down the HMO route, you should fully understand what it entails.  Our "HMO Compliance Week" had a lot of useful information:



    Monday - Launch of HMO Week - overview of changes/how to find information

    Tuesday - Minimum room sizes/understanding licensing fees

    Wednesday - Mandatory licensing changes

    Thursday - Understanding management regulations/Rent to Rent HMO issues

    Friday - Who is responsible and when to apply for a licence/consequences of non-compliance

    There is also a playlist on youtube with HMO FAQs with HMO legal expert David Smith.

    With higher reward comes higher risk and higher fines for non-compliance.  Always start off with a low risk strategy and build from there is my advice.

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    Hi,

    Feel free to check out our blog about Nottingham here too. The East Midlands generally has been quite an attractive area to invest in, especially Nottingham given the large student population.

    We have a number of tenanted BTLs in and around the area, which you can view by clicking here.

    Happy hunting!

    Kind regards,

    Team Vesta

    https://www.vestaproperty.com


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    Thanks for sending over these links, I will have a look at your website. If the council aren't granting HMO licences in Nottingham, I would imagine the area will become less popular with investors... but food for thought anyway. I will need to do some more research. Smile

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    Nottingham is probably the most regulated BTL city in the country. According to the City Council their are 30,000 BTL properties and 8,000 HMO's.

    Consequently Nottingham has an Article 4 direction covering the entire city, an additional HMO licensing scheme covering every HMO and a selective licensing scheme covering all BTL in most of the city.


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    It's all about the tenants. I have properties in 'less desirable' areas (St Ann's, Sneinton, Brickyard estate) but have lovely tenants; decent people who keep their homes tidy and pay rent reliably.

    BUT Selective Licensing was a massive hurdle, form-filling, fees etc.

    Also remember you MUST keep some cash in reserve to replace boilers, maintenance etc. and tradesmen charge the same daily rate whether you're getting £480 a month rent or £780.

    I'd definitely say do some research. Drive round areas at all hours of day and night. Don't buy anywhere with broken glass on the road, dumped furniture etc. Look up crime rates locally.

    But the most important thing is getting the right tenants.

    Good luck with it all


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