Houses in Multiple Occupation (HMOs) are becoming increasingly popular with property investors, or as lettings expert Sally Lawson puts it, they’re “having a love affair at the moment”.
Landlords can buy one property and charge rent to six individuals, therefore making significantly higher returns. Lawson claims: “Every investor either has one or wants one”.
But landlords may face problems when it comes to their letting agent. Lawson has found that many agents will not manage an HMO or house share, despite the chance to earn a much higher percentage of a higher rent.
HMOs are properties with three or more non-related tenants. In most of the country, HMOs can house up to six individuals before the investor requires planning permission. If the house has five or more occupants and is over three storeys, it needs a license.
Although the love of them may be increasing, HMOs are not a modern phenomenon.
Lawson has been an agent since 1990, when HMOs were often “squalid hovels that I would not put animals in, which therefore would attract a certain type of tenant”.
She also remembers the student house shares that were often destroyed by tenants who received many complaints. Lawson, and other agents, would not even contemplate managing one of these properties. They didn’t want the hassle of the tenants or the type of property that would “[lower] the perceived standard of our property stock to our local market”.
But times have definitely changed. Or so Lawson thought; after speaking to fellow Association of Residential Letting Agents (ARLA) members, she found that many in outer London still won’t manage HMOs.
It is a known fact that housing supply is seriously lacking and demand is ever growing. More people are moving for work and house shares will naturally fill the void in their housing needs. Due to this desire for flexible living, HMOs have vastly changed and the market has “cleaned itself up”.
In the Housing Act 2004, requirements and specifications required for an HMO property changed hugely, with stricter guidelines for landlords as to “how they should be constructed and managed”. Many regulations regarded fire safety and suitability for the number of residents.
This meant that the standard of HMOs greatly improved and more responsible landlords began investing in the market. Now, the professional house share is the norm – properties in good locations, with spacious rooms, communal areas and high quality fixtures and fittings, are attracting young professionals.
But still, agents are saying no to HMOs. Lawson understands that some cases are a no-no: “I would not deal with any non-compliant, run down, overcrowded type properties or any that are owned by a landlord that does not take their responsibilities seriously.”
Lawson believes that all agents need is some education about the regulations applying to HMOs, communication with the council regarding planning laws, and understanding of fire regulations.
“If an agent can take the time to understand and adapt their processes for the individual issues that are unique to house shares, like sourcing tenants, managing the communal areas and getting the right mix of residents that will live well together… they can be an extremely profitable and rewarding new market,” she says.1
1 http://www.sallylawson.co.uk/hmo-property-future-letting-agents-ready/