HMO demand and the future?

Reply to the comment left by Reluctant Landlord at 15/04/2024 - 21:04Sounds like you are like a reluctant landlord.
I sold one of my properties to one of those buy anything, anywhere in any condition outfits.. no conveyancing needed , they paid my solicitors bill and got my money in 14 days

Reply to the comment left by GlanACC at 15/04/2024 - 22:03
How much of a financial hit do you estimate you took, compared with selling to an open market buyer?

I am really surprised by the animosity being shown in this thread towards HMOs. This is meant to be a supportive forum for landlords. HMOs are a perfectly legitimate form of renting, though I prefer to call them houseshares myself. It's basically a group of working people or students sharing the common facilities and largely rubbing along, and paying a much smaller cost in rent and bills than they would if they rented a studio apartment or one-bedroom flat on their own. The HMOs being criticised by landlord colleagues here appear to be rooms being let to couples or even family groups, often on benefits, and in crowded town centre locations, which is a very different animal from what I let.

I don't find I get a large premium for renting houseshares, but I do get more stable income and less sizeable voids. If you rent a house or large flat to a couple and one of them loses their job or they break up, you lose rent on the whole unit. This gets serious if you struggle to find a new tenant. However If one of my housemates loses their jobs or moves overseas - as one of them is doing right now - I'm only at risk of losing one-quarter of the rent for a period, as the other three housemates continue to pay.

Reply to the comment left by AnthonyJames at 16/04/2024 - 00:20I took about a 15% hit, the buyer only viewed it using Google earth - BUT the issue was I couldn't re-let the property as I couldn't get a renewed EICR certificate as the sparky said it needed a complete rewire - this would have meant a very expensive exercise as that would have meant taking the kitchen out and the walls were the old plaster and wattle type stuff (not plasterboard) so after costing it up it just wasn't worth the hassle. Hence sold it to the buy anything anyywhere lot. Turns out it was too much hassle for them as well and they sold it on at auction for a £4k profit. It was bought by an Eastern European chap who did nothing and let it out (must be doing that illegally) . Just waiting for it to burn down one day. I know you lose some money but I would never have been able to sell it through an estate agent as the conveyancing solicitors ask for valid EICR certs these days.

Reply to the comment left by GlanACC at 16/04/2024 - 09:12
never think of reporting it to the local council if you are convinced he's letting illegally? This is exactly the stuff that the council should be informed about (you can do anonymously) because letting bad landlords get away with it means the good ones get slated too. Report to the council today!

Hi Manizeh
I have owned and operated HMOs for over 10 years. You ask:
"Is there a reliable method for estimating the value of an HMO? Many evaluators suggest that it depends on various factors, but I’m looking for a more standard approach."
In theory, a licensed, fully occupied HMO with professional tenants paying rent on time or a newly refurbished HMO in a decent area with good tenant demand should be valued more highly than its brick and mortar value. Someone wanting to acquire an HMO might be willing to pay a premium to skip having to buy, refurbish, licence and then let a house and suffer a 3 to 9 month void up front and the risk of cost overruns.
However, from a valuer's perspective, the extra value only applies if the letting business continues without problems. Many lenders and valuers (and Connells are known for this) are very cautious and will not give a premium value to an HMO. If the lender has to step in and sell then, by definition, something has gone wrong. In such cases, knowing that if everything were tickety-boo the property would be worth 15-20% more, is no comfort.
The matter is compounded by the lack of interest in purchasing properties subject to tenancies. It ought to be possible to buy a residential investment but many selling agents advise obtaining vacant possession and many buyers are wary of inheriting problems with regulatory compliance. The latter has been compounded by the mountain of red tape produced by HMG over the last decade or so. Unless the landlord/agent is on top of their game there are likely to be problems with fire safety, licensing, deposit protection or some other issue.
I have been offered operational HMOs at inflated prices. The most recent was offered at 10% more gross rent than a house I had just refurbished and let. The seller wanted 60% more than it had cost me for the house I owned.

Reply to the comment left by GlanACC at 15/04/2024 - 11:17
SINGLE people cannot afford to live by themselves in a single 1 bed flat or studio. Its not economically viable for many so they HAVE TO SHARE the costs with others. OR stay at home!! Thats makes sense. HMO's / House shares helps the housing problem because it's not one person in a house. Its SEVERAL. Do you know the cost of heating bills now? These bills can be shared. It is needed.

The council do not prioritise single people ... this is why there was the ongoing joke about girls getting pregnant just to get a council house!! But that's no guarantee these days because there are not enough houses. Families are in temporary accommodation... So people have to share...

If the HMO on your street is a shambles, blame the letting agent or landlord for not managing the place properly. If there is a mattress or a sofa in the garden (and you're in a licensed area), you should get a warning from the council to clean up. That's what the whole point of licensing.

I don't understand how people get away with running a crap HMO and terrorising their neighbours. Who isn't doing their job here???

Hi

We've been into HMOs since 2016.
They are the only asset class making a reasonable yield in the b2l space currently

The key is to have the right advice and the Internet is not the place for this

We have a clearly defined acquisition strategy and model which has a 100% occupancy less refurbishment time.

We specialise in the West Midlands and West london

If you require advice contact me on psshinh@r3am.co.uk
Parmeader shinh 07958 292 548

Each hmo locality is unique and it must be understood prior to investment ie
Student
Professional
Semi professional
Local council backed tenants....
Central government backed .....

We have extensive models that we can share if required

If one thinks hmos are a path to instant passive income, you'll need to reconsider fast.

They are a path to faster wealth but require effort.....experience and expertise

I had 2 HMOs and gave them up. Far too much hassle. I object to turning property into de facto prisons. Has there been a study on the effects of enforced isolation? I'll bet not !!! But I'm sure there are mental health implications to living in isolation.

On a wider note, I think government/local council interference in the private sector is now beyond excessive. As a landlord I am no longer allowed to decide who lives in my property without Big Brother approval... as an enormous cost, of course, to me and tenants. This means, for example, that a group of friends cannot rent a house. Ridiculous. Whatever happened the free market?
I'm getting out as soon as I can.

Reply to the comment left by Lisa008 at 20/04/2024 - 09:02
I agree with what you say, but when you have an HMO with six people in it and six cars and the next 3 properties are HMOs as well .. see Nottingham for an example