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With the demand for affordable renting at an all-time high, HMOs currently seem like the perfect investment.
The yields that can be achieved are far greater than a standard buy to let with some of my clients tripling their current rents. As soon as you have tasted the return of a HMO it’s very hard to go back!
I have helped clients achieve maximum rent by turning their properties into HMOS and have also got some of my own however with the highs there also comes lows and my blog is going to teach you the pros and cons and the dos and the don’ts of HMOs.
It’s very important to do your homework and make sure you familiarise yourself with the minimum standards set up by your local authority, you also need to find out if your property will require a licence or not. It’s important to follow the rules as you could be liable to hefty fines for breaching them.
Here is a link to our local councils minimum standards-
file:///C:/Users/tonya_000/AppData/Local/Packages/Microsoft.MicrosoftEdge_8wekyb3d8bbwe/TempState/Downloads/HMO%20-%20Minimum%20Standards%20(1).pdf
When you are out viewing, take you minimum standards to refer to, a measurer (I recommend a laser for speed) a note pad for your measurements and notes on any reconfiguration you require and a camera to take photographs. Always price your works up and allow room for issues and always price your rents at the minimum rate, never work out your numbers based on best figures you can achieve.
When you are number crunching you need to take into account monthly expenses you will be expected to pay for such as utility bills, council tax, TV licence, Wi-Fi, insurance, cleaning etc all of which will eat into your profit. If you are using a managing agent then you will also need to allow for letting and management fees.
Managing a HMO is not for the faint hearted, you will find that there is normally more maintenance to attend to, lots of regulation you need to follow, regular fire alarm testing and a regular turnaround of Tenant.
Here are some of my HMO buying tips
- Make sure there is a demand for HMOs in the area – City’s, large towns and anywhere with a Uni should have a good demand.
- Don’t expect an easy ride, this type of property management is the hardest.
- Ask your council for the current minimum standards and HMO guidelines and follow them
- Apply for a licence if required
- Have a fire risk assessment and make sure you have carried our safety checks.
- Don’t expect long term tenancies, HMOs are normally short term.
- Factor in all expenses when buying a HMO and working out the rental yield, I try to look for a net of at least 10% +
- Maximise your income by renting out Garages, HMO tenants will not expect access to this so this extra income can help towards maintenance/management fees and the same for parking spaces.
On the announcement of the recent Tenant fee ban there was further blow to Landlords and Agents on hearing that from the 1st of June 2019 we will no longer be able to hold more than 5 Weeks Rent as a Deposit. This will now be the law and we must also refund any surplus on deposits we already hold at renewal stage which is just an administrational nightmare. This is for all Agents and Landlords and any person failing to follow this will be breaking the law and susceptible to very costly fines.
With this now in place Landlords and Agents will have to protect themselves better from the offset and ensure we are choosing the right Tenants to look after our properties.
How do we do this?
Firstly, I can’t see Landlords being as flexible on accepting pets with the new cap in place, most contracts would state that professional fumigation would be required by Tenant at end of tenancy which can be pretty costly in itself and that’s before any other cleaning or damage that might need to be accounted for. I can’t see there being enough room in the deposit, especially on the lower end monthly rental figures. For this reason, Landlords may have to restrict renting to Tenants who have pets.
The reason why 6 weeks rent worked for most is because we had a 1 month’s rent for potential rent arrears ( some Tenants decide to not pay the last month’s rent despite being told they need to) plus a couple of weeks left for minor repairs and or cleaning. Two month’s rent would have been the norm for pets to allow for fumigation plus the above and in other more risky tenancies we may have charged more to protect ourselves.
Another area we might need to look at is ensuring rent protection is put in place for every tenancy, this would mean Landlords have peace of mind that they will get their rent payment no matter what and also be able to use this at the end if the Tenant doesn’t pay their last month’s rent, leaving the full deposit for any dilapidations. We could further protect our financial risk by also having a guarantor, this is really as much as we can do as Landlords/Agents before taking full rent in advance for the whole term.
Make sure you have an agent who has your best interests foremost and that is fighting to find you the best tenant not fighting for personal commission. In an industry full of young negotiators all on a low basic with strict targets it’s hard to avoid the “let and forget attitude” as I call it. I feel for the trainees as it’s a very tough and target driven industry but at the same time it’s no good for Landlords. This was one of the reasons I chose to leave agency and set up on my own, none of my colleagues I work with now are on personal commission or targeted, we all work as a team and only want the best for the landlords we look after.
The dispute centres are set up to protect tenants therefore it is fundamental that Agents and Landlords are setting up new tenancies accurately and ensuring Tenants understand their checkout obligations.
There are plenty of Landlord’s out there who take the mick when it comes to deposit deductions and those wanting to charge tenants need to first of all make sure they have offered the property in the best condition at the start of the tenancy. They also need to make sure they have done their job as managing agent by paying regular visits to their tenants and to advise the tenant throughout the duration of any issues they may face at the end.
Paper trail is crucial for this, without it you might as well not even hold a deposit.
There are lots of cases in which the dispute centre has (in my opinion) favoured a tenants case too one sided, for example only last week I had a landlord who lost a claim for replacement carpet on a brand new carpet that was supplied to a tenant of which they burnt badly with an iron. With her high standards as a Landlord she chose to replace this for the new tenancy again and was only awarded a £50 contribution towards the cost of her new carpet from the dispute centre, something of which I will never understand nor agree with.
Its normally always better for a landlord to try and settle outside of arbitration so communicate with your tenants and try to reach an agreement yourself!
It’s hard to not feel that as a Landlord you have little protection and the only way to deal with that is to accept it for what it is. Don’t have unrealistic expectations that your Tenant is going to leave your property immaculate and don’t assume you will win your disputes regardless of how black and white it might be, assume the opposite and hope for the best.
Also remember no Agent in the world can guarantee a risk free Tenancy, don’t expect them to provide the impossible…. us Agents can’t wave a magic wand and get your Tenant to pay rent or have them keep the house clean and damage free, its simply unrealistic!
Remember it’s a business, it’s not personal. No business is plain sailing, no tenant or tenancy is perfect and you may have trouble along the way. If you can adjust to this mind set and remember that the tenant that may have left a burn mark on one of your new carpets has also paid your mortgage for the last few years you will be a much happier and content Landlord.
Are Landlords Giving up?
There has been a rising number of Landlords exiting the market, which has left me worried on where this will leave the industry as a result. I, myself as a Lettings Agent have seen my own clients off load due to the concern in rising costs, continued legislation change and what I guess feels at times a very one sided industry. I am also a Landlord and I can’t help but also feel as though we are being pushed into a corner and driven out of the market.
In November 2018, the East of England was the highest region for landlords selling up and Landlords leaving the market was 100% higher than the national Average.
With so many Landlords off-loading it is likely that the supply of rental properties will drop which could mean rents increase due to there not being enough property to meet Tenant demand, this could actually make the market much worse for Tenants and long term renters as their rents are likely to increase and could also mean there its lots of competition for the same property.
The Tenant fee ban has now become law and will become enforceable from the 1st of June 2019, This is terrible news for the industry and something I believe is completely unfair, one sided and a reckless move from the government which will loose the industry millions not to mention all the unfortunate people who will loose jobs thanks to their decision. As I expressed in my last blog the ruling has not been thought out nor the bigger picture seen by our government.
This will have a knock on effect as Estate Agents are likely to pass on this cost to their landlords which again may mean Landlords increase their rents to cover this cost or mean further Landlords start to sell up. The fee also applies to private Landlords who will no longer be able to charge for any administrational or referencing costs which means estate agents and landlords will have to still do the same level of work, admin and Tenant checks at no charge. Lettings portfolios will be less lucrative and I fear lots of Lettings agencies may have to make redundancies and possibly smaller Agents not being able to cope at all.
Although all seems pretty bleak for the Lettings Industry I predict that this year will be a good buyer’s market due to the amount of property that will need to be sold, this is good news for Investment buyers who are in it for the long run and first time buyers in getting their feet on the property ladder, there should be some good deals to be had and buyers could be in a very good negotiating position.
I have been out this weekend viewing property and have put some offers over on what could be some fantastic investments, I will keep you updated on how these deals go!
Tonya x
Are you thinking about Investing into property?
If you’re in it for the long run you can’t lose….
Today it is very hard to make a ‘quick buck’ flipping a property (buying/renovating/selling) due to shortage of suitable property and taxes, however in regards to securing your future there still isn’t a better way then with a property portfolio!
Here are some of my tips…
- Start with low value properties
- If buying a leashold property ensure you have a healthy lease length remaining to see you through to retirement age
- Check the service charge/ground rent (I/A)
- Pick an area in demand to avoid any future void periods
Regardless of what others may be telling you at this uncertain time, don’t be scared to invest!
If you’re in it for the long run you can’t lose….
Think about it, your tenant is paying your mortgage monthly for you plus you property is growing in value/equity as you sleep, it’s a win win.
Keep following us for more Investing Tips.
Rea
X
This is just the perfect solution for a new look Kitchen on a small budget and I just had to share it with you all.
Before
After
My brother in-law (Ryan) and his partner (Lilli) recently purchased their first home together. The property needed a little tidy up inside and they started decorating as soon as they got the keys.
The budget was limited and a new Kitchen was not possible so they decided to give the Kitchen a face lift themselves. I was very apprehensive when they first told me this but I was so impressed by how it looked once finished and still can’t believe it only cost them £50.
They ordered 10 rolls of Self Adhesive Film from Wilko.com and they chose Glossy Grey which looks fantastic. The rolls were only £5 each, here is the link to the product-
https://www.wilko.com/en-uk/d-c-fix-self-adhesive-film-glossy-grey-675cm-x-2mf346-8146/p/0463684
They had to take the doors off and wrap each one individually, once wrapped they simply popped the doors back on. Not an air bubble or mark in sight and it generally looks like a brand new kitchen. Lilli also said the whole process was pretty therapeutic!
Lilli In action
I asked Lilli for her tips on anyone thinking about giving this a go and here is what she said;
1. Get the applicator kit it was only £3 and very helpful.
https://www.wilko.com/en-uk/d-c-fix-application-kit-399-6016/p/0439766
2. Don’t pull the plastic, let it fall onto the door and then press out the air bubbles using the applicator kit.
3. Make sure surface is scrubbed clean before wrapping to get smoothest finish.
4. Watch some YouTube videos before starting and try it out on a more discreet/hidden cupboard first.
Wishing Lilli and Ryan all the best in their lovely new home and I’m looking forward to a dinner invite soon!
Tonya
x
As a lettings agent for the past several years, I am fully aware of the preconception landlords have towards renting to students. I would always get the same answer (no) when asking the question “will you consider students?” So, I decided to have a go at one myself and have never looked back, in fact I now generally only let to Students.
I find renting to students very reliable and due to the lack of available properties also very lucrative, to date I’ve had no major issues from any of my Student Tenants.
If you are emotionally unattached to your letting property then why does it matter who rents it? The main concern is to get it let, obtain a steady income with minimal issues and maximize return.
During my time as both Landlord and Agent I have had many “perfect“ Tenants, the ones who have the perfect profession, have amazing salaries and present themselves well at viewings, that have ended up paying rent late and have left properties dirty and damaged.
The main misconception is that Students will trash the place, yes you might have a bit more cleaning to do at the end of tenancy and yes they might have a couple more parties than the average Tenant but managed in the right way will ensure your students behave and respect the property they are living in like any other Tenant would.
When you are renting a property as a house share you have got to expect to put your hand in your pocket at the end of each term, I always have properties/bedrooms professionally cleaned in between Tenancies and there is often a bit of general maintenance to carry out. The gain overrides the loss as you are receiving a much greater rent to let it out in this way. It is unrealistic to believe as a landlord that you do not need to give a bit back yourself and spend a little bit of money when its needed.
Tonya’s Top Tips
To run a successful student house follow these simple rules….
- Referencing Guarantors
When you rent to a student ensure that you obtain a UK based, working guarantor that will sign an agreement to say that they will pay the rent if tenant fails to do so. I never rely on student finance as this could change or could be spent. Most students do not want you calling Mum or Dad to say the rent hasn’t been paid and is rarely something I need to do. If a student does not have a UK based guarantor then I would recommend payment upfront for the term, most overseas students are aware if this and will expect to have to pay a lump sum.
- House Rules
I have a lengthy document that all my Tenants sign which forms part of their AST (Assured Shorthold Tenancy) if you do not spell this out at the beginning it will be hard to police part way through. Make it very clear what type of Tenants you want in the property and what will and won’t be tolerated.
- Presentation
Just because they are students doesn’t mean they want to live in a dive so decorate and clean the house as you would if you were renting to professionals. If you let it out in a dirty and worn condition you could attract tenants with lower standards that most probably won’t look after it during Tenancy (not that you deserve it to be looked after if you’re not prepared to let it out nicely in the first place) Give them a home they can be proud of, that they want to keep clean and show off to their mates.
- Regular Property Inspections
This is so important when renting to students. I recommend inspecting communal areas every month and bedrooms every 3 months as minimum. The more you are there the more you can control and avoid. Students can sometimes be a little too laid back in reporting maintenance so these visits will also ensure that any maintenance is picked up early. After your visit send letters/emails if you have spotted any issues so you can keep on top of it, it’s also important to give credit when its due and say thank you to Tenants for keeping the property clean and tidy will go a long way.
- Communication
Regular contact is crucial. I once took on a student house where the Tenants had built a bar in the lounge, they told me that the Landlord had not visited once in 3 years!
Communicate with your students like you would any of your other Tenants, you want their trust and respect. In larger houses organize quarterly meetings so the Tenants can discuss any issues or any requests they may have. This will go a long way and if you treat your Tenants well they will treat your property well.
- Landlord break clauses
Of course there is always a chance you may have a difficult Tenant so I would always recommend a Landlord break clause at 6 months. I always put a two month break clause in mine that can be served on the 4th month of the Tenancy but, I can say I have only had to use this once. The minimum term is always 6 months.
The break clause can be used as a little reminder to Tenants that they might be asked to leave if they are showing signs of trouble and will often deter them from bad behaviour.
- Inventories
Provide detailed inventories of bedrooms that the Tenants sign, in a house share it is easy to control deposit deduction within the bedroom as this is the responsibility of the individual Tenant. Communal areas are tricky though, I always provide a communal inventory however these areas actually fall to the landlord’s responsibility and it is in fact the landlord’s duty to keep these cleaned and maintained. It is near on impossible to find blame of a damaged item in communal areas (unless someone owns up to it which in some cases they have) if they don’t you will just have to swallow it. It’s also not fair to split the cost between all tenants and that will just upset your relationship with the rest of them and the ones that do keep the property well.
Of course when renting a property out as a house in multiple occupancy (HMO) there are lots of rules and legislation you must follow to rent your property out legally and to regulation. It’s important to check with your local council what the minimum standards are and if you need to apply for a licence.
You will always have a little more cleaning and little more maintenance in between Tenancies when renting to student but this is generally worthwhile for the extra rent you will receive. There are lots of students that are prepared to pay very good rents and the demand for student accommodation is at an all-time high.
So, I’m all for renting to students and I hope this blog has made you open to the idea.
Tonya
x
http://www.officialpropertytwins.com
I’m excited to talk about this little gem of a studio in Chelmsford I have just snapped up.
The studio cost me £105,000 and will achieve a rental figure of £525pcm, that’s a healthy yield of 6% (before costs)
It’s on the outskirts of Chelmsford City and is located in a quiet cul de sac, with bus links and local amenities all within walking distance.
The current tenant has been in situ for over 7 years and is likely to be there long term which is great for us and saves money paying an agent to find a new suitable tenant.
I went for this apartment as it is what we call ‘virtually freehold’ the lease is for a whopping 999 years (from 1 January 1980) The ground rent AND service charge is just £788 per annum…..If you see something like this snap it up!
These types of property are safe bets when it comes to investing especially if you are investing for the first time.
A wise friend of mine taught me to try to invest in several small buy to lets properties, rather than a couple of large houses. Reason being if the very worst should happen and you have a void period or your tenant stops paying rent, the costs are a lot more manageable to cover. Secondly In my personal opinion I believe you will get a better long term return on 3 – 5 smaller properties.
Keep following us for my property tips….Happy Investing!
Rea
x
The short answer is YES!
We say keep it simple, manageable and according to HouseBeautiful Magazine a shed is a must have. According to their research (June 2017) a whopping 82 per cent of property professionals claim a a decent sized shed is the most cited feature to boost value.
To achieve a low maintenance garden utlilise as much of the space with patio/slabs or shingle. Go for hardy evergreens, once established they will require little care as well as some pretty perennials which last for a couple of years and require minimal upkeep.
Next up is my own garden transformation!
Rea x
Money Mondays: How to buy your first home with your partner
Money Mondays is your go-to guide for all the information you need to manage your finances. For this week’s Money Can’t Buy Me Love column, we speak to property experts about how to buy your first home.
Buying your first home with your partner is an exciting move, but one that can be difficult to navigate.
To help guide you through every step of the journey, from securing an agreement in principle (AIP) to finding a solicitor, we spoke to property experts Rea and Tonya, also known as The Property Twins. The pair are experts in everything from lettings and sales, to interior design and investments, and share a combined property portfolio of over £3 million.
Here, they share their advice for getting your first step on the property ladder.
Get your finances in order
The most important thing to start with is obtaining your AIP. You will need this in order to have an offer accepted on your chosen property, so it’s a good idea to have this sorted before you head out on viewings. The AIP is usually valid for six months, which gives you plenty of time to search for your dream home. We recommend visiting a local mortgage broker rather than a bank to obtain this, as you will be given access to various lenders and the best rates.
Make a checklist
Remember that you’re buying a home together, so be prepared to compromise. You will never love exactly the same place but you both need to be happy – after all, this is a big commitment. Write a checklist of important things you need to prioritise before you set off, and consider questions such as:
• What location suits you both?
• Size: how many bedrooms do you need?
• Outside space: do you need a garden?
• Parking: do you need off road?
• Do you want something new or are you keen to find something you can mark your own stamp on?
It’s easy to get carried away and fall in love with a property during the viewing process, but always remember to make sure the property fits with your checklist.
We also recommend registering with your local estate agents directly, to receive up to date alerts on the latest properties for sale.
Consider Shared Ownership?
Check with your local housing association to see what Shared Ownership schemes might be available to you. These schemes allow first time buyers to step on the ladder with a much smaller deposit than is usually required. This enables you to buy a share of your home (between 25% and 75% of the home’s value) and pay rent to the housing association on the remaining share. Be aware that the scheme is usually only available on new build properties, so this will limit your search.
Check with your local housing association website to see what’s available and always seek advice from an independent mortgage adviser who specialises in this area.
Next steps
Once you have found your dream home and your offer has been accepted, you will need to instruct a solicitor. Opt for someone local as you will need to pop in with ID and paperwork, so there’s no point choosing a solicitor who is miles away. They will guide you through the entire process and keep you updated on key stages. The sales process can take around 12 weeks plus, so we suggest you take this time to discuss thoroughly between you the responsibilities of living together.
10 things to consider before you move into your new home
Before making the big move, think about the following:
- Write a list of all utilities and costs for running your home: it’s always good to keep a budget spreadsheet.
- Search comparison sites online for the lowest home utility rates, as this will ensure you find the best deals out there.
- Decide on what each person will contribute to the household financially. What will your share be?
- It can be hard running a household but decide from the start what responsibilities you will each take on, such as washing, ironing, taking the bins out and so on.
- Try to keep a reserve pot for unexpected maintenance. Agree an affordable amount that you can each contribute towards an emergency kitty.
- Consider purchasing appliance and boiler breakdown insurance to cover you should the worst happen. These are often only a few pounds a month per appliance, so could save you a small fortune in the long run.
- If your budget is low, pick out key areas to refurbish first – if necessary, you can always do other rooms later on. The most valuable areas of a home are the kitchen and bathroom so work on these first. You will most likely cover all costs in the value you add to your home by doing these rooms up.
- When decorating, pick out rooms you like for inspiration online or in magazines. You will always be able to find a high street version which is much more affordable.
- Keep an eye on our website for some of our favorite high street bargains
- Most important of all, get a Will. It’s horrible to think about this but you must have a plan set out should something happen to one of you. If you are not married, your share of the property might not necessarily go to your partner, but to your next of kin instead. It’s vital you have a Will in order to protect yourself and your assets in tragic circumstances.
Most importantly of all, enjoy it! Buying your first home is such an exciting thing, so try not to get stressed and enjoy the process together.
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