Marketing No Comments

Why location is critical for the HMO market

Grant Hendry, director of sales at Foundation Home Loans, explores how HMO licensing, stock availability and cost varies from region to region and why a number of great HMO opportunities remain available to landlords in the current market.

The modern mortgage market is awash with complexity from a borrower, intermediary and lending standpoint. This is further exacerbated by additional financial pressures being felt by households across the UK – both owner occupied and rental – and some lingering uncertainty over the impact of recent events on interest rates and house prices.

Inevitably, increased living costs are leading to some people having reconsider their immediate homeownership aspirations and the demands of their current accommodation. For landlords, many have gone back to basics in terms of delving deeper into their yield, void and cost calculations. When it comes to yield, houses in multiple occupation (HMOs) have historically topped these charts and proved an attractive option for the more hands-on landlords who have the knowledge and experience to manage differing tenant and property demands.

This yield equation was evident in the most recent BVA BDRC Landlord Panel research for Q4 2022 which outlined that HMO properties went back to the top spot of the rental yield table. These were reported to be offering the strongest yield by property type, at 6.4% for the quarter, followed by multi-unit blocks at 6.2%.

Furthermore, the research also suggests that the proportion of gross rental income spent on maintenance and running costs of HMOs hit a low in Q4 at 26% from the high of 29% experienced in both Q1 and Q3. For the full picture, the proportion of gross rental income spent on maintenance and running costs of HMOs was recorded at 28% in Q2 2022 and 24% in Q4 2021.

Demand remains strong amongst landlords and tenants, meaning that this remains an area of lending in which we at Foundation Home Loans continue to see strong levels of business. Although, there are also an argument to be made that this is more down to our approach – we are one of only a few lenders which don’t load ICRs on such property types – rather than currently being the industry norm.

To find out more about how we can assist you with your HMO Mortgage please click here

With such strong yields, albeit with additional costs actuated, this means that the HMO market is flourishing right? Right?

It seems that location is critical for this particular market.

As outlined in recent market analysis by Sirius Property Finance, while a raft of regulations have led to increased tenant welfare, these have also contributed to a decline in HMO numbers.
Taking a trip back in time for a moment, October 2018 saw the UK government extend the mandatory licensing of HMOs to cover the vast majority of properties containing five or more people from two or more separate households. Previously, only properties with three or more storeys containing five or more people from two or more households required an HMO licence.

There can be no argument that improving the safety and living standards for tenants is a huge step in the right direction. However, this has also placed increased pressure on landlords with some opting to offload their HMO properties rather than dealing with the added costs.

As highlighted in the aforementioned Sirius analysis, this has led to the overall number of HMOs falling by -2.4% in the past year, but this drop is dwarfed by some incredible regional declines. The East Midlands was suggested to have recorded an annual HMO stock decline of -26.1%, the North East has seen HMO stock levels drop by 15.8%, while in the South East numbers are down -6.7%. However, these falls are not universal across all regions. Indeed, the likes of the West Midlands (16.9%) and Yorkshire & Humber (11.2%) recorded impressive annual stock growth over the past year.

Discover our Mortgage Broker services.

These figures demonstrate how HMO licensing, stock availability and cost varies from region to region and, as with any property investment, it’s vital that landlords do their due diligence before entering into this arena. However, a number of great HMO opportunities do remain available for those landlords who are looking to maximise yields and capitalise on rising levels of tenant demand.

There are also plenty of attractive options from an HMO product perspective. Especially from those lenders who are highly experienced in this type of lending, who are finely attuned to the needs of such landlords and have the underwriting capabilities to match their ever-changing needs.

By GRANT HENDRY

Source: Financial Reporter

Marketing No Comments

Truss to announce stamp duty cut – report

UK housebuilders rallied on Wednesday following a report that Friday’s mini-budget could include a plan to cut stamp duty.

According to The Times, prime minister Liz Truss will announce the move in the mini-budget in an attempt to drive economic growth. It was understood the PM and chancellor Kwasi Kwarteng have been working on the plans for more than a month.

Truss believes that cutting stamp duty will encourage economic growth by allowing more people to move and enabling first-time buyers to get on the property ladder, The Times said.

It cited two Whitehall sources as saying that cuts to stamp duty were the “rabbit” in the mini-budget, which the government is billing as a “growth plan”.

Under the current system, no stamp duty is paid on the first £125,000 of any property purchase. Between £125,001 and £250,000 stamp duty is levied at 2%, £250,001 and £925,000 at 5%, £925,001 and £1.5m at 10% and anything above £1.5m at 12%. For first-time buyers the threshold at which stamp duty is paid is £300,000.

During the pandemic, then chancellor Rishi Sunak lifted the stamp duty threshold to £500,000.

At 0910 BST, Persimmon shares were up 5.4%, while Taylor Wimpey and Barratt were up 4% and Berkeley was 3.5% firmer. On the FTSE 250, Redrow was 5.6% higher, while Bellway and Crest Nicholson were up 3.6% and 3.4%, respectively.

Tom Bill, head of UK residential research at Knight Frank, said: “Nobody can accuse the new government of lacking an economic vision. If its low-tax approach extends to stamp duty, recent history tells us it will trigger higher levels of demand in the housing market at a time when mortgages are getting more expensive, which will support social mobility.

To find out more about how we can assist you with your HMO Mortgage please click here

“Prices could move higher in the short term if supply initially struggles to keep up but more balanced conditions will return provided the cut is immediate and permanent.”

Neil Wilson, chief market analyst at Markets.com, referred to the potential stamp duty cut as “the old Tory trick of juicing the housing market in its heartlands to boost confidence (wealth effect) whilst doing not a lot for housing supply”.

“I’m not for concreting over the green belt at all, but there will be questions about the economic soundness of this policy, as there always is. However, with interest rates rising so quickly, an offset to the cost of buying a home would grease the wheels of the market -without higher rates could cause the housing market to seize up.”

He added: “Clearly a stamp duty cut is good news for housebuilders who can expect higher selling prices as a result.”

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, argued that a stamp duty cut could do more harm than good.

“Buyers are unlikely to be unhappy at the prospect of a tax cut, but if the government chooses to cut Stamp Duty in an effort to stimulate the housing market, there’s a risk it could do more harm than good.

Discover our Mortgage Broker services.

“It’s easy to see why the government is concerned about the housing market. We’ve seen demand fall consistently since May, when rocketing bills, rising house prices and ever-increasing interest rates started to take a toll on buyer enthusiasm. There’s a risk that if rate rises accelerate, pressure on buyers could reach a tipping point, where demand dries up.

“We know from very recent experience that a Stamp Duty holiday can stimulate demand. However, the only reason these holidays work is because people feel they have a small window of opportunity to take advantage, otherwise they’ll miss out. The point at which they think they can just wait for the next one, they will start to become less effective.

“Even if it does stimulate demand, it overlooks the fact that the real brake on the property market is a severe shortage of supply. With an average of 36 properties on each agent’s books, we’re still close to an all-time low in the availability of property for sale. Driving demand without addressing supply would risk more buyers chasing a tiny number of properties, which would push prices up.

“By ramping up prices at a time of rising mortgage rates, the end result would be higher monthly mortgage costs, which would be increasingly unaffordable. And the Stamp Duty holiday wouldn’t help on this front. This in itself could be enough to put buyers off, and if it deters enough of them, it could end up having the opposite impact to the one that’s intended.”

By Michele Maatouk

Source: Sharecast

Marketing No Comments

New crackdown approved to tackle substandard HMOs in Dudley

A new crackdown on substandard HMOs has been approved in Dudley to stop rogue landlords who cram tenants into overcrowded homes.

Councillors say they need to “make sure that new homes in Dudley Borough meet a certain standard of quality for the good of the people who live in them”.

Developers looking to turn a property into an HMO (house in multiple occupation) for up to six people will now have to apply to Dudley Council for planning permission under the new ‘Article 4 Direction’ passed this week.

While HMOs help to meet a specific housing need, especially for those on a low income, there are concerns that high concentrations in certain areas are harming their character, putting pressure on infrastructure and diminishing community relations.

It is claimed the main issues with HMOs revolve around anti-social behaviour, noise, inadequate living conditions, litter and parking issues.

To find out more about how we can assist you with your HMO Mortgage please click here

Evidence provided by West Midlands Police and the council’s anti-social behaviour team found a correlation between HMOs and increased crime and drug offence levels.

The ‘Article 4 Direction’ has now been rubber-stamped after a six-week consultation period. Councillors say the new legislation will allow the council to keep tabs on the standards of homes across the borough.

Discover our Mortgage Broker services.

Councillor Simon Phipps, cabinet member for regeneration and enterprise, said: “We need to make sure that new homes in Dudley Borough meet a certain standard of quality for the good of the people who live in them and other residents in the local area.

“It’s clear from the evidence gathered that the unchecked creation of small HMOs using permitted development rights undermines our ability to properly plan developments in our neighbourhoods.

“Our plan will create consistency in the planning system so all HMOs must go through the scrutiny of a planning application before they are created. But we won’t just stop at this measure, because the emerging Black Country Plan will also introduce new policies to make sure new homes are better quality and do not detract from the wider local area.”

By Josh Horritt

Source: Express & Star

Marketing No Comments

HMO Property Investment Services in the UK: What You Need to Know

If you’re looking for information on HMO property investment services in the UK, you’ve come to the right place. In this blog post, we’ll discuss what HMO investment services are, and how they can help you achieve your financial goals. We’ll also provide a list of resources where you can learn more about HMO investing and find professionals who can help you get started.

What is a HMO investment?

A HMO investment is a type of property investment that allows you to purchase multiple properties under one roof. This type of investment can be beneficial for both investors and tenants, as it provides a way to reduce costs and increase profits. When done correctly, investing in a HMO can provide a steady stream of income and long-term capital growth.

Is HMO a good investment?

HMO property investments can be an excellent way to generate income and grow your wealth over time. However, there are some risks associated with this type of investment, so it’s important to do your research before getting started. If you’re ready to learn more about HMO investing, we recommend checking out the resources below.

What is a good ROI for HMO?

There is no definitive answer when it comes to what a good ROI for HMOs is, as it will vary depending on a number of factors. However, many investors aim for a minimum return of 15% per year. To learn more about how to achieve this, we recommend speaking with a professional HMO investment advisor.

To find out more about how we can assist you with your HMO Mortgage please click here

Where can I find HMO investment properties?

There are a number of ways to find HMO investment properties, including online listings, estate agents, and word-of-mouth. We recommend speaking with a professional HMO investment advisor in the area you want to purchase in to learn more about the best way to find properties that fit your needs.

Discover our Mortgage Broker services.

Things to consider when buying a HMO

HMOs, like any other financial investment, have advantages and disadvantages. It’s important to evaluate these factors and decide whether it’s the right option for you.

Pros

  • Strong rental yield when compared with buy-to-let
  • Lower risk of rental voids
  • As the rent is shared among several tenants, the impact of overdue payments is reduced.
  • If the location is right, tenant demand for low-cost housing is high.

Cons

  • Managing the property can be more difficult
  • Start-up costs can be higher if conversion is needed
  • Running costs can be higher
  • Arranging HMO finance can be tougher
  • What are regulations of HMOs?

HMOs must adhere to stricter rules and standards than Buy-to-Lets in general, especially when it comes to fire safety and planning permission. As a result, you’ll also find that the fines for non-compliance are greater. Speak to a good estate agent who specialises in HMO like Mistoria Group who are HMO experts and have helped many landlords successfully let these properties across the UK.

By LINDSEY BENSON

Source: News Anyway

Marketing No Comments

First time Bridging Loan – Heavy HMO Refurb – Case Study

The Client

We recently were successful in assisting a First time Landlord client in purchasing a standard 3 bed Victorian terrace. Their goal was to turn the property into 6 bed HMO by extending to the rear and converting the loft space.

The client only had enough funds to cover the initial deposit, stamp duty, fees, and the initial tranche for phase one of the works.

The Property

Since the property was to be heavily refurbished and developed, obtaining a traditional mortgage for such a property development is just not possible. Typically, lenders will only lend you the money to buy the property, meaning you wouldn’t be able to carry the conversation. Plus, with such significant works being carried out lenders would have major concerns about their security, probability of the works completing and future value.

Contact us today to discuss Bridging Loans and how we can assist you.

This is where a Bridging Loan works perfectly and really adds value.

Most Bridging Lenders can lend up to 70/75% net of fees to help buy the property, based on its current value, pre conversion. In addition to this, they can also lend a further sum of money to assist the completion of the major building works. Typically, a facility of up to 70% of the Gross Development Value is available.  (GDV = value of the property after the works have been complete).

In this clients’ particular scenario the property was purchased for £345,000. After the works were completed, the property was worth £650,000.

Note – 100% LTV for bridging finance is available if you have additional security in the background.

To add even more difficulties to the equation, the client had never completed such a development / refurb project before, nor had any building or landlord experience. Most bridging finance lenders would require you to have some exposure in this type of environment.

Discover our HMO Mortgage Broker services.

The Resolution

Despite the limitations, we were able to secure the client a competitive deal that enabled to them to complete the transaction and finish off all the works needed.

However, it doesn’t end there… Like any form of finance, bridging loans also need to be paid back, usually within 12 months.

Typically, there are two repayment strategies for bridging finance:

  • Sale of the asset, OR
  • Refinance the loan onto a traditional term mortgage

In this client’s scenario the exit plan was to refinance as they wanted to benefit from the rental income.

This posed another problem however, as the client was considered a first-time landlord, having never let a property before. On top this the tenancy was for an HMO and the property was to be owned/let via a Limited Company.

The majority of Buy to Let lenders will not lend to applicants looking to arrange a HMO having never had any Landlord experience before, as they consider this type of buy to let very specialist and high risk. However, this wasn’t an issue for us, we were able to source a competitive HMO Mortgage deal for the client enabling them to pay off the bridging loan within the loan term and achieve their HMO landlord dreams.

To know more and speak to one of our Bridging Finance Expertscall us now on 03303 112 646. You can also fill in this short online form to get started. Our team of Bridging Loan Experts will get back to you straight away.

Marketing No Comments

Plans submitted to create new five-bedroom HMO in Connah’s Quay

Plans have been submitted which could see a three-bedroom house in Flintshire converted into five bedsits.

The application would see the use of the property on Howard Street in Connahs Quay change to become a house in multiple occupation (HMO).

A letter submitted on behalf of the landlord states the proposals have been put forward due to the need for small housing units in the area.

Although concerns have previously been raised in Flintshire regarding the impact of HMOs, planning consultant Adrian Thompson said the development would make “efficient use” of the house.

He said: “The change in use safeguards the living conditions of neighbours and the character of the area.

“Granting permission will not lead to proliferation of HMOs in the area, because this is the only known HMO on Howard Street, and the nearest known HMOs are on another street. It is a semi-detached property.

“The original internal layout has been retained, with the first floor as it was and on the ground floor the lounge and sitting room re-purposed as bedrooms.

“The ground floor retains the kitchen, dining room, a downstairs toilet and a shower room.”
Questions have been raised in the past by councillors regarding the living standards provided to tenants in HMOs.

According to the documents, the smallest bedroom at the property measures 8.2 square metres, which is below the amount suggested by Flintshire Council in an advice note to developers.

But as the guidance has yet to be adopted formally, Mr Thompson said the indication that living quarters should measure at least ten square metres would carry little weight.

Comments are currently being invited on the application via the local authority’s website.
Planning officials are aiming to make a decision towards the end of June, but timescales are currently delayed due to the coronavirus pandemic.

By Liam Randall

Source: Deeside

Marketing No Comments

Plans for seven-bedroom HMO in Broughton backed for approval despite widespread opposition

Plans to turn a family home into a seven-bedroom House in Multiple Occupation (HMO) have been backed for approval despite widespread opposition.

About 50 objections have been submitted against proposals to convert the current three-bedroom property on Larne Drive in Broughton.

It comes amid concerns from residents that it would have a negative impact on the neighbourhood and lead to parking problems.

Broughton Community Council and local councillor Billy Mullin have also voiced strong criticism.

However, the application has been recommended to receive the green light by Flintshire Council’s chief planning officer.

In a report set to go before councillors next week, Andrew Farrow said the scheme was acceptable because it was in a residential area.

He said: “The dwelling is located within a row of similar properties upon a modern residential estate.

“Given the above, it is considered that the built nature of the proposal will not have a significant detrimental impact upon the character and appearance of the existing dwelling or streetscene in which it is located.

“There is a concern that the increased residential use of the HMO, would leave to an increase in the parking requirements above what would reasonably expected of a private dwelling.

“The proposed parking provision submitted shows the front of the property will accommodate three cars clear of the highway.

“A condition is imposed to ensure that the parking provision is provided and maintained on site, in perpetuity.”

It’s not the first time plans for a HMO in Broughton have caused controversy.

In December 2018, proposals to create bedsits on Gladstone Road were approved on appeal, despite originally being refused by the local authority following a protest by neighbours.

Worries have been raised that the latest scheme could lead to a rise in anti-social behaviour, but Mr Farrow said such claims had not been proven.

He said: “Concerns have been expressed that the proposals would cause noise/disturbance with the extensions also adversely affecting light and privacy upon existing neighbouring occupiers.
“Some of these concerns and fears relate to the future occupants of the development.

“Concerns that tenants could cause these problems are not unique to HMOs and there is no evidence to substantiate this is the case.

“Anti-social behaviour could equally apply to other forms of residential occupation.

“It is considered that all of the matters in the consideration of this proposal are acceptable and that planning permission should be granted.”

Proposals to extend the property to provide extra accommodation were approved in October last year.

The most recent application will be discussed at a meeting of the council’s planning committee at County Hall in Mold on Wednesday.

By Liam Randall

Source: Deeside

Marketing No Comments

Plans to turn Wrexham family home into HMO approved on appeal

Plans to turn a family home on the edge of Wrexham town centre into a house in multiple occupation (HMO) have been approved on appeal.

Councillors originally rejected proposals to convert the house on Salop Road into five bedsits in September because of the large number of similar properties nearby.

They said it would breach council guidelines which state the maximum amount of HMOs allowed within a 50 metre radius of any given location should be no more than ten per cent.

Permitting the application would have increased the concentration of bedsits in the area to 16 per cent.

However, their decision has now been overturned by an inspector appointed by the Welsh Government following a successful appeal.

In a report, Hywel Wyn Jones said he could find no proof of the planning committee’s claims that the scheme would have a negative social impact.

He said: “There is no substantive evidence before me to indicate that the existing presence of HMOs in this mixed-use part of the town is causing an over concentration that is affecting the social fabric or residential amenity of the community, nor that the scheme would be likely to create such problems.

“My visit did not reveal any of the physical manifestations that can arise from such developments, such as high numbers of letting signs, unkempt frontages, or household waste strewn along the street.

“As the ten per cent threshold is one provided in guidance to assist decision makers, it should not be slavishly followed as though it were an absolute limit.

“The mixed-use character of this edge of town centre location reinforces my view in this respect.

“Thus, on this main issue I conclude that the proposed use would not be harmful to the social fabric or residential amenity of the host community.”

The plans were also refused on the grounds it would cause an increase in demand for parking on the street, adding to existing problems.

While Mr Wyn Jones acknowledged there was pressure on the amount of spaces, he concluded the scheme would not give rise to an additional demand.

He added: “None of the matters raised in objection to the scheme lead me away from finding that it is acceptable.

“I shall therefore allow the appeal subject to the conditions suggested by the council and one to deal with cycle storage.”

By Liam Randall

Source: Wrexham

Marketing No Comments

Armley Park Road HMO application withdrawn

An application to convert a four-bedroomed house in Armley Park Road into a six-bedroomed house of multiple occupation (HMO) has been withdrawn, writes Keely Bannister.

According to a notice issued by Leeds City Council, the application was withdrawn following an e-mail from Michael Sunderland from DMS Architecture Ltd, who is the development’s agent.

Details of the e-mail has not been made publicly available.

Mr Carpenter lodged the application with Leeds City Council in July, with the notice to withdraw being placed in December.

The proposed development would have involved the lowering of the properties basement floor and the conversion of this space from storage into a living room and en-suite bedroom.

The ground floor living room would also have been converted into a bedroom.

As reported previously in The Dispatch, objections were lodged against the application with other residents on the street stating that the property was being “kept in a state of disrepair” and that the road is “already packed full of cars” which “packing in more renting tenants” wouldn’t improve.

Consultation was sought from the Canal and River Trust, who had no comment to make and the council’s Highways Team, who had no objection to the application, subject to a number of conditions around cycle and bin storage being met.

Source: West Leeds Dispatch

Marketing No Comments

Bid to turn Wrexham town centre house into HMO refused over parking issues

A bid to create a house in multiple occupation (HMO) near Wrexham town centre has been thrown out because of fears it will added to parking issues.

Proposals to turn a three-bedroom house on Oxford Street, which is close to Eagles Meadow shopping centre, into five bedsits were originally submitted in October.

Objections were raised ahead of the application being considered by councillors on Monday as a result of the lack of parking spaces on the road.

Local councillor Adrienne Jeorrett said the situation had become so bad that one resident who lives on the street was forced to return their disability car.

Addressing Wrexham Council’s planning committee, she said: “Whilst I accept the need for low cost housing, it’s a great disappointment to me that in 2019 adults are having to live in one room with a long term impact on health and wellbeing.

“In Oxford Street and the surrounding roads parking is a major problem for residents. This proposed HMO will add to that problem.

“To say that Oxford Street is near town does not mean that residents work in town.

“It does not mean that someone does not need a car, especially if they work somewhere where public transport no longer reaches.

“One resident in this street has already had to send back a disability car because they couldn’t park in the street.”

The local authority’s chief planning officer had recommended the scheme should be given the go ahead.

In a report, Lawrence Isted disputed claims that it would make the parking situation worse as the property was located close to the town’s bus and railway stations.

But the council’s highways department backed refusal because of the “significant” demand for parking in the area.

Highway development control engineer Peter Douthwaite said: “We’ve looked at it and the proposal is deemed to be increasing the level of parking requirement in an area already suffering from parking problems.

“We think it should be refused due to lack of parking provision.”

Councillors unanimously voted to reject the proposals at the end of the debate.

By Liam Randall

Source: Wrexham