Tell us about your HMO's and related experiences

[Nicholas Wallwork]

As the title says what is everyone's experience of HMOs (Houses in Multiple Occupation) and what is the best return you created or have seen?

HMO's will continue to become one of the biggest things in property in 2016 mainly due to supply vs demand and increase living costs causing professional tenants to house share instead of being able to buy their own home.

Thoughts?

 

[Amjedk]

There are many pro's and con's for HMO. One of the challenges is securing funding. Many lenders are reluctant to fund.

 

[Nicholas Wallwork]

There are many pro's and con's for HMO. One of the challenges is securing funding. Many lenders are reluctant to fund.

Yes it can be harder but not impossible and there are several lenders out there who currently fund HMOs (Kent reliance, Shawbrook etc).

Also a lot of investors are turning to commercial end finance rather than the above which is more based on residential valuations. Commercial valuations only lend up to 60% of the value BUT the value is often higher than resi as its calculated off the income it generates and less so on the bricks and mortar.

I use end commercial finance on 90% of my HMOs...

 

[Amjedk]

Hi Nicholas

Thanks for your advice. I too have turned to commercial finance and they are offering to lend up to 70% of valuation but still waiting. What would be a competitive interest rate offer?If you don't mind me asking how many HMO's do you have? What advice would you give to someone starting off in HMO's. Normally HMO's are all inclusive of utilities do you have any have any tricks to keep costs down? Thanks again.

Amjed

 

[Nicholas Wallwork]

Hi Nicholas

Thanks for your advice. I too have turned to commercial finance and they are offering to lend up to 70% of valuation but still waiting. What would be a competitive interest rate offer?If you don't mind me asking how many HMO's do you have? What advice would you give to someone starting off in HMO's. Normally HMO's are all inclusive of utilities do you have any have any tricks to keep costs down? Thanks again.

Amjed

It depends on the rate but we've got 20 year fixed rate deals from Lloyds at around 5% which I'm happy with as it removes all risk. Find a 20 year fix in the residential mortgage market!

70% is quoted but the reality is the Valuers will probably value it down a bit compared to the valuations banks using 60% LTV will use so it's swings and roundabouts in my opinion...

I've got circa 250 rooms at present I'd estimate (over several businesses) and yes lots of tips I'm sure, where do I start!

We include all bills, use economic boilers and megaflows, LED sensor lighting, extra insulation, tamper proof thermostats, all built in furniture (wardrobes, beds etc) so all we do is paint it white and new mattress occasionally and we're good to go again...

How many do you own @Amjedk and in what areas?

 

[Amjedk]

Hi Nicholas

This will be my first HMO with 7 rooms with a possibility of adding 2 or 3 rooms. My area is Manchester. Still waiting for my mortgage offer but suspect I will be offered base + 5%. To minimize the outgoings I have secured an excellent deal on gas and electricity.

Built in furniture is a great idea. What furniture do you put in to the bedrooms and lounge?

Amjed

 

[Nicholas Wallwork]

I personally find a lounge a hindrance and I turn most into an additional letting room. They tend to be kept messy by tenants and out off people on viewings. So not having a lounge has meant many of my properties have been easier to manage and let! Obviously it can make a big difference to the yield as well...

We build in solid beds (with under bed storage),in built wardrobes and shelves where possible. We also add desks with a couple of white gloss kitchen wall units above to make a desk and storage area very cost effectively...