Landlords seeking HMO to off-set higher costs

I was interested to read an article in LettingAgent Today that suggests that an increasing number of buy to let investors are converting properties to Houses in Multiple Occupation (HMO) to increase their rental income as tax increases start to bite in 2017.

This is in line with advice that I have been giving to several landlords I support via my lettings business (Martin & Co Oxford).  In Oxford, as many of you will know, HMO’s require a licence from Oxford City Council.  Licences are restricted to ensure that roads or parts of Oxford do not become dominated by HMO properties, and to ensure that minimum standards of health and safety are observed.

Applying for a licence follows a standard process, initially to validate that the property is eligible for a licence, and a process of inspection to confirm the precise requirements for conversion work to meet the Council’s health and safety standards.  Following conversion, the property will be inspected and once deemed to have met the standards it is signed-off and granted a licence typically for a 12 month period.  On re-inspection, it can be possible for a property to renew its licence for a longer period up to 5 years.

My agency is accredited by Oxford City Council to advise landlords on HMO and to manage those properties thereafter.  HMO properties usually require more attention in terms of management, placing an emphasis on regular inspection, careful communication with tenants and monitoring of common issues such as mould growth, drainage and general up-keep.

So, given all this, is it worth the hassle?  Well in general yes.  HOM in Oxford has historically been synonymous with student properties – this remains a big market with 30,000 students resident in the City each year.  However, with property affordability remaining an issue for young professionals, there is growing demand from this group for high quality HMO accommodation, that allows them to live in Oxford affordably in groups often as couples.  Whilst students are increasingly stringent in their requirements too.  Making HMO a real success requires landlords to be clear about their target market, and to understand their requirements reflecting those preferences in the layout and content of the property.

Done well, HMOs in Oxford offer gross rental yields of 8% vs a City average of nearer 5%.  For landlords with multiple properties, having HMO within their portfolio is sensible to boost income to off-set the changes to tax reliefs.