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The ‘Buzz’ Word…

Cartoon house overcrowded by unhappy inhabitants

Everywhere I look, I see the same message…

Every other ‘promotion’ I see coming through my inbox has the abbreviation ‘HMO’ in it!

HMO’s (Houses of Multiple Occupation) seem to be really topical at the moment (and I can’t blame people…I love them too!!) Although they have been in existance for many, many years (mainly in the form of student lets, bedsit accommodation, hostels and the like), however, in more recent years, they have been popular with people getting into a variety of different markets.

Whether it is room-let accommodation provision for high-end professionals, charities, or benefit tenants, there are certainly decent potential profits to be made by following this strategy.

However…

…there are definitely points for which you need to watch out and which can all-too-often be ‘skirted over’ when it comes to singing the praises of HMO properties.

Just the other day, I was in conversation with someone about how to finance HMO deals. They had been told that it is common to buy HMO property and raise finance as a ‘buy-to-let’ and then, once set-up, let it out as an HMO (as HMO finance can be harder to come by for some people). There are several points which are raised in this type of scenario which could lead to more serious implications:

• By setting up the property as a Buy-to-Let, you will be in breach of the mortgage terms and conditions, thus likely to be committing mortgage fraud
• The insurance you take out may be invalidated because you have not told the lender the nature of the tenants in the property
• You risk facing serious penalties if something were to go wrong in the property, and in particular if one of the tenants was injured

Here are some more salient points to consider when looking to set up an HMO correctly!

• Check whether the area in which you wish to set up an HMO is subject to Article 4 Direction (meaning you will have to seek permission to change the use of the property from the planning department of your local authority)
• If you are looking to set up a student let, double-check plans for larger corporations coming into the area to set up high-rise student accommodation (this has led to the downfall of many a popular HMO community in larger cities)
• Ensure you seek the advice of the local authority when setting up your property, particularly in relation to the fire regulations
• Make sure you are informed about what constitutes an HMO…the definition is ‘3 people or more forming 2 or more households’, this means that a 2 bedroom flat being let to a single person and a couple would constitute an HMO and therefore potentially be subject to certain requirements

It all boils down to one thing…being educated! Finding out what you ‘don’t know’ is just as important as knowing what you’re doing. 🙂

To your continued property success,
Hazel

 

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