Top Ten Tips
- Location Areas filled with students and singles and near good transport links are where HMOs do best. Try to stay away from owner occupier neighbours who can complain to local authorities and cause you problems. Any area with a demand for rental on flats and single occupancy premises will likely have a great demand for HMOs too.
- Cost Consider the cost of your borrowing, the cost of renovations, furniture, insurance and meeting safety regulations. There are often hidden and unexpected costs so make sure you are prepared to stretch the budget further. The returns on HMOs are not always immediate so make sure you don’t borrow over your head and that you aren’t relying too heavily on property value increasing.
- Time Before purchasing a HMP consider the time investment that it will require. Starting with your first HMO will always take you longer than you expect. You need to think about time for renovations and decorating, interviewing tenants and then the continued rent collection and problem solving that goes with managing HMOs. Having said that, once you are up and running you should find it manageable alongside other fulltime work.
- Rooms To make it worthwhile choose a property with a minimum of 4 available rooms to rent out. Obviously the more rooms the better in terms of income so consider which other rooms in available properties could also be converted into bedrooms. You may require planning permission for changes and will need to seek guidance if you are looking at having more than 6 people in the one dwelling.
- Legalities To make things happen as quickly, smoothly and cost effectively as possible ideally you want to stay out of the bureaucracy of local authority permission giving and licensing. You only need to register with the Local Authority when you have a Mandatory Licensable property which is a 3 or more storey building with 5 or more tenants. Ideally stay away from buildings with more than 3 stories and you will be clear of this need for a license. Each Local Authority is different so do check in the area you are looking to purchase as to what will be required from you as a HMO landlord.
- Preparation Before you jump in at the deep end take your time to research and prepare for becoming a HMO landlord. The Nick Fox HMO property success course is an ideal tool to help you with this. Also contact other landlords in the area, use internet sites and forums to gain information on the area, properties and news on local authority changes and requirements for HMOs.
- Tenants Think about the type of tenant you would like to attract before making a purchase. If you want to rent to students make sure you are within easy reach of the university for example. If you want to attract single business workers in the city, then you will need a property that is developed to a higher standard with better fixtures and fittings to attract the clientele.To meet the minimum safety requirements, you must fit a grade A fire alarm system, fire blankets in the kitchen, an escape route from every bedroom and emergency lighting on the escape routes. You need to factor these costs into your budget. The furniture you provide must be fire safety complaint and you must maintain annual gas checks. As of last month all rental properties must also be fitted with carbon monoxide detectors.
- Renovations To make your HMO stand out from the rest you need to consistently maintain the property, particularly the communal areas, but also begin with a property that is finished to a high standard. When looking at potential HMOs consider the development they will require and how you will fund this.
- Management If you do decide to go ahead and purchase a HMO you will need think about the management of this property. You can leave this to an estate agent or take control yourself. Important things to prepare are application forms, interview check lists, inventory of the property and contracts. You will also need a good system to collect rent.
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