Because generating massive cashflow from property is actually pretty EASY to do. But what most people don’t realise is that the key to your property business success (as with most things in life) is to follow a PROVEN SYSTEM.
So here’s why I’m writing to you today…
My good friend Matthew Moody has decided to SHARE his “HMO Secrets System” to just 100 lucky investors in a one-day event. Matthew has been operating in the HMO (house of multiple occupancy) market for over 6 years and what he doesn’t know about HMO’s isn’t worth knowing. He’ll be sharing with you the exact 7-Step plan that his business uses to source, identify, prepare, market and manage their HMO’s.
If you want to learn how to generate up to £1,000 additional cashflow per property you need to book your place today:
HMO’s are probably the TRICKIEST and most DIFFICULT form of property investment to get right when it comes to generating cashflow; in fact most people who use them are completely INEXPERIENCED.
I’ll also be at the workshop to answer any questions you may have so be sure to book your place today.
This has been expected for some time now. I just picked this up from the lovemoney website so you can read directly here.
Last week, Housing and Planning Minister John Healey announced that, from April, it will require any landlords who want to provide Houses In Multiple Occupation (HMO) to apply for planning permission first, before they build or convert a home.
This costly and time-consuming measure will put many off, and even those who jump through the hoops could be denied permission. There are fears that NIMBYs (people who say Not In My Back Yard) will oppose each and every HMO planning application to stop students, migrants or those on low incomes moving into their neighbourhood.
What exactly are the new rules?
Landlords will need to obtain planning permission where a material change of use will occur – which will now include renting a property to three or more occupants who are not members of the same family.
Healey also outlined proposals to give councils the right to introduce licensing schemes without seeking permission from central Government in so-called ‘hotspot areas’.
Local Authorities currently have to seek approval to introduce HMO licensing schemes, which require all private landlords with properties within the area to get a license.
The councils can also decide if the landlord is a ‘fit and proper’ person to manage their properties, impose conditions and standards on licenses and charge landlords a fee at their discretion.
Why the crack-down on houses in multiple occupation?
The Government says that a cluster of too many shared houses can cause problems, especially if let to short-term residents with little stake in the local community. It also claims tenants can also suffer from poor conditions and management of the properties by landlords.
The new rules are intended to help ‘stem the growth of large pockets of shared homes – which can change the balance and nature of communities.’ They will also aim to tackle these ‘pockets of unsafe and substandard accommodation’.
The Minister claimed that many towns and cities across the country have suffered the effects of a concentration of HMOs. Market, coastal and university towns have reported problems due to large student populations and HMOs.
And the reaction to the changes?
The National Landlords Association (NLA) condemned the changes saying they will reduce the supply of essential shared housing.
It claims that by making it more difficult and costly for landlords to provide this type of accommodation, the measures will reduce choice for tenants and increase pressure on local authority housing lists.
Plus it notes that last year’s Rugg Review, an independent review of the private-rented sector commissioned by the Government, dismissed these changes as an ‘extreme response’ which local authorities are ‘ill-equipped to handle.’
Of course you’d expect the NLA to be peeved at the measures, but it’s not just them. The British Property Federation, Residential Landlords Association, and National Union of Students have all rubbished the rules.
Many of the objections point to the fact that the Government seems to have bowed to a small number of people who have shouted very loudly about anti-social behaviour in areas with a high level of HMOs. The NIMBYs have won.
But by making it harder for landlords to offer these properties they will have to raise rents, which will drive students and migrants in to ghetto-style communities, a far cry from the Government’s stated policy of social integration.
Shared housing accounts for 20% of the private rented sector and plays a vital role in provided low cost housing for students, young professionals and those on low incomes.
The British Property Federation argues that a tiny fraction of places suffer from a high concentrations of HMOs and that using a broad brush approach to deal with different issues relating to anti-social behaviour makes no sense.
The NUS added that students contribute hugely to their local areas, not least by giving the local economy a massive boost. Indeed, small businesses in new HMO no-go areas would be likely to suffer.
Defending the Government
A massive 94% per cent of respondents to a Government consultation on this issue last year said they’d experienced problems of the effects of HMOs, including anti-social behaviour, litter, noise, and problems with parking. A whopping 84% of respondents agreed with the proposal that planning legislation should be amended to deal with the problems associated with high concentrations of HMOs.
Of course, this could well be a small minority of people punching above their weight. Perhaps there wasn’t enough landlord representation during the consultation process, for which they, and their trade bodies, only have themselves to blame.
Bound by red tape
However, the Government has a pretty good track record of being heavy handed with landlords over the last few years. They are already regulated with an estimated 50 Acts of Parliament and 70 sets of regulations governing the sector, and more on the on the way, according to Paragon Mortgages.
Just when they have got to grips with the tenancy deposit protection scheme, introduction of HMO rules, and the need to provide Energy Performance Certificates, more rules are proposed. These include a National Landlords Register, licensing all letting agents and statutory regulation of buy-to-let mortgage lending and advice, on top of the new regulations above.
On the one hand the Government says it wants to develop a vibrant rental market, but its approach of using a sledgehammer to crack a nut when it comes to regulation doesn’t support this aim, in my view.
Of course, protection is essential for tenants and affected homeowners, but landlords are being ever more tightly bound by red tape. A survey published last week showed that 60% are worried about the level of regulation.
The housing market needs a healthy private rented sector to help fill the enormous gap caused by insufficient housebuilding and the growing population.
Houses in Multiple Occupation (HMOs) have received a lot of press attention recently, both good and bad. As a result, people are now either wishing to jump onto the HMO bandwagon, or want nothing to do with them.
If you have any interest in property investment whatsoever, you must familiarise yourself with HMO regulations.
Landlords already running HMOs in England had until 3rd July 2006 to present their applications to their local councils. Any landlord who owns a property that has been let out to sharers may thus be breaking the law if he has not already registered that property.
From 6th April 2006, the Housing Act 2004, has meant that there is a new definition of a House in Multiple Occupation (HMO). Anyone considering a career in property investment in the UK should familiarise themselves with the Housing Act 2004. You can easily download this from the internet.
• To improve the condition of rented housing stock.
• To reduce the number of unscrupulous landlords letting substandard and potentially dangerous property.
• To improve management standards of rented property.
• (Indirectly) To increase revenue for local councils through what is effectively a landlord’s tax.
• (Indirectly) To compile a register of rented property stock.
It is hoped that HMO legislation will result in a much better deal for tenants by removing rogue landlords from the system. However, as with most things, the better landlords will now have to go through additional red tape to provide a similar service to what they have already been providing.
To get a HMO licence you will need to submit a completed application form obtainable from your local council. As part of your application, you will need to include floor plans providing room sizes and an indication of current fire precautions in your property. You will be required to prove the safety of any fire detection system by providing a certificate issued by a suitably qualified engineer.
You will also need to submit a current Gas Safety Certificate. You can obtain this from any Gas Safe (formerly CORGI) registered engineer. An electrical safety inspection will also need to be conducted by a qualified electrician and an electrical safety certificate issued.
If you are providing any electrical appliances, you will need to have a PAT (Portable Appliance Testing) certificate issued by an electrician. This will cover items such as electric kettles and toasters etc.
You will also need to prove that you have suitable management arrangements in place. For example, deposit procedures, tenancy agreements and procedures for dealing with anti-social behaviour.
The final requirement is for you to be a ‘fit and proper’ person, by providing a Criminal Records Bureau (CRB) check. This will need to be dated within the previous six months. Your local authority will inform you if this is required.
For any new property that I buy and renovate, I will always make it compliant with any current regulations for that property type in that location. If I am unfamiliar with the location, I will contact the council and ask about minimum requirements. This way, there will be no ambiguity when I come to resell or let the property.
I will do this regardless of whether my intention is to use the property as a House In Multiple Occupation (HMO) or not. For example, I will aim to do the following works as a minimum during any property renovation:
• Install interconnected smoke alarms and heat detectors.
• Install fire doors to kitchens and bedrooms.
• Have the electrical installation checked and upgraded to current standards.
• Ensure gas fittings and appliance meet current safety standards.
This will save me time and money at a later date, especially if I decide to use the property as a HMO.
For any business, ‘Cashflow is King’. Whenever I buy property, I always invest for cashflow. There’s little point in buying a property in a great area for a lot of money, if you’re not making positive cashflow from day 1. Learning how to better manage cashflow can make the difference between your success and failure in business.
It doesn’t matter if you think that your favoured location will generate great capital growth. The question you need to answer is whether you will be able to sustain that capital growth on negative rental returns.
HMOs are a great way to obtain substantial cash flow from your properties. It is not uncommon to achieve up to 300% returns over and beyond single occupancy rentals in high demand locations all over the UK.
Since HMOs provide much needed affordable housing, particularly for younger people, there is a strong market for such accommodation.
A HMO property will not only give you additional cash flow, but you will also benefit from the usual advantages of owning property. For example, you will have good capital growth depending on location and market conditions. Furthermore, it is not always necessary to fill all the rooms to service any finance payments.
If you plan your property purchase carefully, you will be able to grow your portfolio quickly and with minimum effort. By applying some basic rules and understanding current market conditions, investing in property should provide you and your future generations an income for life.
• An entire house or flat that has been let out to three or more tenants who form two or more households and who share a kitchen, bathroom or toilet.
A household is defined as members of the same family living together.
• A house that has been converted into bedsits or other non-self-contained accommodation and that has been let out to three or more tenants who form two or more households and share a kitchen, bathroom or toilet.
(A self-contained unit of accommodation is one which has a kitchen or cooking area, bathroom and toilet inside it for the exclusive use of the household living within the unit)
If the occupiers need to leave the unit to gain access to any one of these amenities then that unit is not self contained.
• A converted house containing one or more flats which are not wholly self-contained and which is occupied by 3 or more tenants who form two or more households.
For a property to be classified as a HMO, it must be used by the tenants as their only or main residence. Properties that are let to students and refugees will be treated as their only or main residence.
If your property falls into any of the above categories, you may need to apply for a HMO licence. In order to find out whether you need to obtain a HMO licence, you must contact your local council and speak to the Environmental Health Officer, who will advise you accordingly.
Every council has their own guidelines for HMO compliance, so the final answer will depend on the size and location of your property. I always advise my clients to call the council before buying a property that they are thinking of converting to HMO usage.
One simple phone call could save you thousands of pounds as you may find that very little is required to prepare your property as a HMO.
Regardless of your property location, you will definitely NEED a HMO licence if your property
1. has three stories or more (including usable basements or attics), and 2. is occupied by five or more people, and 3. those people form two or more households, and 4. the tenants share the kitchen, bathroom or toilet.
If the above applies to you and you don’t have a licence, then I would advise you to contact your local council immediately as you are most certainly breaking the law.
It will cost a neighbour or tenant the price of a phone call to report you, and this could cost you up to £20,000 plus recoverable rent!
Applying for a HMO licence may appear like a lot of work. However, when you’ve gone through the process once, you’ll find it much easier for any subsequent properties that you purchase.
Since Houses in Multiple Occupation (HMOs) provide much needed affordable housing, particularly for younger people, there is a strong market for such accommodation. I can only see this market growing further.
As property prices increase, first time buyers are also getting older. 5 years ago, it was common for a sub-30 year old to purchase a property. However, because of the current house price/income ratio, it’s uncommon for anyone below the age of 30 to be able to afford a decent property without raising a huge deposit.
Therefore, people are ‘forced’ to rent. Those that can afford to, will rent out a single bedroom flat. Otherwise, it is more common for groups of friends to live together in 2+ bedroom houses and flats.
A tenant will often think to himself, why pay £700 per month on a mortgage when you can rent a single room from £200 per month depending on where you live. This has created a huge demand for HMO landlords who need to fill rooms in their multi-let properties.
The type of people that would want to live in such accommodation include, but are not limited to:
In fact anyone, who enjoys living with other people. I get several calls a day from the above types of potential tenant looking for individual rooms to let in a property.
So if you are looking to purchase an investment property to let out to sharers it may be worthwhile to determine where these sorts of people would like to live. Once you have shortlisted several such areas, you can focus your efforts accordingly.
