Investor Landlords need to know about HMOs – Part 1

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Contrasting examples of HMO properties in the pictures above – on the left a well-maintained and desirable shared house, on the right a house in Reading, converted to bedsits (but with no smoke alarms fitted) which was burnt-out in 2010.

As part of our ongoing policy to advise landlords on the rental market, we present the first in our series of blogs about HMOs – House in Multiple Occupation, and what this means to investor landlords.

House in Multiple Occupation
The definition of a HMO (House in Multiple Occupancy) is described on the government website direct.gov.uk * “A property is an HMO if it is let as a main or only home to at least three tenants, who form more than one household and who share a kitchen, bathroom or toilet.”

(*NOTE – the direct.gov website has been extensively updated in 2012 to make it clearer to follow, and the description is now altered – follow the link above for the new wording but we think the old wording sums it up pretty succinctly, so we have left it in our update.)

A household can consist of a single person, couple, couple with children, relatives living together (including step-children, grandchildren, uncles, aunts, nephews, nieces, cousins and foster children). It can also include carers, nanny, and au pairs.

HMOs can be contained in a house, flat or other converted building, they could be purpose-built or places like guest houses that are let out during the closed season, or hostels. Bedsits which share kitchens and bathrooms also qualify as HMOs.

If you are in doubt about whether the property you own is a HMO it is best to contact your local council to discuss the accommodation and to get an opinion on whether it does need to be classified as an HMO.

In certain circumstances an HMO must be licenced by the local authority and this varies from area to area, the local council will be able to give you more information on this. You will always need a licence where your property:

1) Has three or more stories

and

2) It is occupied by five or more people who form more than one household.

Market trends for Landlords with HMOs
Previous Labour governments set legislation in place to have all these properties registered with their local councils so that they can be monitored. With the private rented sector due to rise against the rate of property ownership the government are under pressure to ensure the rights of tenants are not compromised.

The current government is concerned to clamp down on landlords who do not comply with legislation regarding properties of multiple occupancy (HMO). This type of housing tends to hold the most vulnerable tenants – social housing, young people sharing, students, immigrants and people on low budgets. The result of this is that unscrupulous landlords have been known to ignore issues of basic safety.

As a landlord of a HMO property it is important to work within the legal guidelines. This makes sense from a business point of view, as well as a moral one. If properties are well-maintained landlords and their agents are more likely to find more discerning tenants, who in turn are more likely to take care of the property.

The better your property is looked after the more it is worth in capital terms. As HMOs can form a large number of the property in certain areas, keeping them in good condition benefits all the landlords by making their investment more desirable, and therefore increasingly profitable.

  • Landlords of sought-after properties can command the best rents within the price band
  • Landlords of popular properties will have more choice of which tenants to accept
  • Better maintained properties will suffer less void periods between lets

HMO property can be very profitable for landlords because they are usually housing more people per square foot of property space, and so can attract higher rental value returns on a cost:income ratio.

We are always happy to discuss investment potentials with purchasers and landlords, and your local Estate/Letting Agent is a good place to start if you are considering getting into this market.

Our second part in the series comes out here next week, but if you can’t wait please click through to part 2.

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Concierge services are in demand in rented housing

porters and concierges can influence tenants decisions on renting

Concierge or porter services:

Concierge services have been common in certain parts of the world for many years especially in the Middle East, America and Far East. Nearer to home the French concierge has been a long-standing fixture in communal buildings. They have become an almost fabled literary figure – a cross between caretaker, nosy neighbour and guard-dog.

The costs of running a concierge or porter service is added to the service charge, which is paid by the Landlord. However these properties can command a higher rent. Britain is beginning to catch on to the idea of concierge services, and most new developments in London, of any scale, provide one.

Why is a concierge facility becoming so popular?

One of the main reasons is security of course. Having a person in the building at all times of the day (and possibly night) helps to make residents feel secure. This is particularly important for single women and for people who spend a lot of time away from their property.

Tenants also like concierge services is that as residents they have someone to complain to if things are not working properly within the building, which means they feel they have some control over the place where they are living. Many concierges adopt a proprietary manner and will go above and beyond their brief to make sure that buildings are kept clean, tidy, and in good working order.

Another convenient benefit to landlords and tenants in property with Concierge facilities is when work needs doing there is someone on site to hold a key and grant access to workmen. In fact the porter/concierge will often have their own list of reliable tradesmen for the job. They soon get to know who is good and who is not.

Unlike the stereotype of the European ‘live in’ concierge most London concierges are smartly uniformed, professional and they definitely take a pride in what they do.

Tenants appreciate the ‘little touches’

Many concierges will organise laundry services, booking travel, taxis and theatre tickets, making restaurant reservations, and carrying luggage. Some concierges in more exclusive developments may even go so far as to stock the fridge, regulate the heating, and water the plants for residents while they are away.

The smaller services such as having someone to take in mail which saves all that hassle of calling into the (not necessarily very) local sorting office to collect, can make life so much easier for the busy professional.

Tenants like the convenience of having a concierge service with their local information and their practical knowledge of the building. It is amazing how many tenants do not have a practical nature and so it is handy for them to have someone able to change a lightbulb just down the stairs.

As experienced letting agents we have noticed that if there is a choice between a property with or without concierge services tenants will often opt for the one with the added benefit, even if the rent is slightly higher.

Landlords also benefit from concierge services

For landlords having a concierge on site offers another level of protection to their property. They will usually keep an eye on empty property for absentee landlords.

Letting agents soon get to know the concierges in their area and they will be tipped off if any of their tenants are not behaving in a proper ‘tenant-like’ manner. This enables the managing agent to intervene before costly problems occur.

If you like the sound of investing in property with concierge services talk to us about which are best. We always make a point of knowing which developments have the best porters.

Philippa Edwards blogging for Riley Marshall Limited – a dynamic sales and letting agency which provides a personal, professional and considerate service, with pride and integrity as driving principles. Based in Surrey Quays, covering South East London and Docklands.

National Rent increases confirmed by RICS report

The Royal Institute of Chartered Surveyors (RICS) have confirmed what most letting agents must know – that UK residential rents have increased over the last year. The national rise is 4.3% and RICS are forecasting a rise of a further 3.9% in the next 12 months.

This is due to a rise in demand for rental properties which so far this year has outstripped supply. This is good news for landlords, but harder on tenants. There are regional variations of course, but the South East is one of the areas with increasing rents despite high levels of building in the London Area.

RICS global residential director Peter Bolton King said: “. . . it is clear we have seen rents grow steadily right across the UK for some time. This is partly down to the problem of the scarcity of mortgage finance and the large deposits required by lenders.”

Buy to Let Landlords were finding no problem in securing mortgages during the same period, according to the Council of Mortgage Lenders in their report this month. They noted an increase in Buy-to-Let lending of some 25%.

Price Waterhouse Coopers are expecting a long term return on capital of some 2-3% pa over the next 13 years. They are suggesting that the returns on properties will be similar to the return from gilts and equities.  John Hawksworth, Chief Economist for Pricewaterhous Coopers, said: “Given that housing returns will not be perfectly correlated with returns on equities and gilts, including housing, an investment portfolio together with these other assets could have some advantages in terms of diversifying risk.” He was also careful to point out that investing in property is not without risks in itself however.

For anyone considering starting a property portfolio as a long term investment plan Riley Marshall would be happy to discuss the merits of properties for rental and make suggestions on your shortlisted properties in terms of rental yields.

Demand is outstripping supply despite new developments across London.

If you are considering increasing your existing holdings we can review your current properties and discuss what else to include as your portfolios grow. Please contact us to discuss this further + 44 207 394 1160.

We are happy to call you back at a time to suit you – simply send us an email with your number and a guide as to when you prefer to be called. Please put ‘Investment Landlord’ into the subject bar.

EPC – benefits for the Landlord

The EPC (Energy Performance Certificate) is a mandatory requirement for Landlords of rented property but even though you have to have it is always helpful to know how it benefits you.

Contained within the EPC (Energy Performance Certificate) is a report on the expected energy performance of your building, and it will include recommendations to improve energy efficiency. Landlords and homeowners can also arrange to have a DEC (Display Energy Certificate) which shows what is actually being used.

EPC houseThis gives the investor landlord a visible, quantifiable and mandatory energy performance certificate which is turn provides an accurate comparison of energy efficiency of numerous properties.
Property owners are then able to make an informed decision as to which course of action would provide the best improvement on the EPC/DEC rating within a budget.

Having the current and potential energy saving status of the building in this standard format allows the owner to calculate what savings can be made on energy bills against the costs of the recommended work.
Landlords and their agents can use an efficient EPC report as a marketing tool when letting property to tenants. Tenants will be reassured to know that their bills will be as economic as possible.
Obtaining an EPC will assist prospective owners or occupiers to make an informed decision about potential energy consumption and carbon-dioxide emissions from occupying property.

For those that are concerned about green issues, a better energy rating gives a lower carbon footprint.
Buildings with a high asset rating will be more energy efficient and therefore have lower running costs and emit less CO2 whilst buildings with a low asset rating will be less energy efficient and therefore have higher running costs and emit more CO2.

An EPC may help sell or rent a building if there is a choice of similar buildings available to buy or sell if those buildings have different asset rating.

Having an EPC provides a better understanding of your property’s energy efficiency. The energy rating can help rent out your property. It indicates to a prospective buyer or tenant how energy efficient your premises are. It should also provide information that may help to reduce the running cost of the property. The better the rating, the higher the potential rental income and hence higher value. See our post on how the EPC will benefit tenants.

An EPC is ‘current’ for up to 10 years, and the EPC is specific to the building, not the owner, so can be transferred on change of ownership within the 10 year period. For more information please visit our EPC blog.