The Buy to Let market in Watford is booming at the moment
but choosing the right property for you can be a bit of a minefield. HMO’s are
something that I get asked about quite a lot and if you’re not familiar with
the term it means ‘House in Multiple Occupation.’
HMO’s can be defined in different ways but generally the investors I speak to are trying to create HMO’s by hopping up an existing 3+ bed property into a number of separate dwellings and renting the rooms out individually. For example, if you take a larger style 3 bed house you could also use the 2 reception rooms as individual bedrooms to create 5 bedrooms.
By doing this you are likely to create a higher gross rental income. Depending on which area you are looking at in Watford you can achieve £1300-£1500 for a 3 bed house on a single let basis whereas you could achieve 5 X £500 per room and increase your income £2500. Another benefit to operating this way is one room being void for a short period won’t have as great an effect on your rental income.
The figures sound great but there are a lot of other things to consider in this process. There are considerably more rules and regs that apply to HMO and once you have 3 or more floors with 5 or more people you come in the realms of mandatory licensing. Whether you are licensed or not you will need to adhere to the stricter building regs that apply to HMO’s regardless of the need for a license or not and there are steep fines if you are seen to breech
these rules that are put in place mainly for the safety or your tenants.
Your wear and tear of the property will be higher and if you are self-managing then you are likely to experience far more maintenance problems as a result.
Oh yes, and more often than not you will need to cover all bills and council tax too as you can’t expect mixed groups of tenants to pay for this or arrange it themselves.
There are lots of properties being run this way in Watford. Some are being run very well and others are being run outside if the rules and not so well. The council will gradually catch up with all landlords who are breaking the rules.
If you are going to create one of these types of HMO’s then you MUST follow the rules. Put the fire safety precautions in place. Speak to the council/fire officer to make sure you are doing the right things. Check whether you are allowed to put the number of people in the house that you plan to and that the rooms are the right size as there can be minimum size restrictions. Don’t over estimate your rental income and factor in some voids and a percentage of your rental income for maintenance. Don’t try to squeeze too many rooms into a property. Speak to a mortgage broker as you may need a specialist mortgage and your loan to value could well be lower.
My opinion is you should look after your investment so Let the rooms in good condition. Provide clean and solid furniture and a nice communal space so your housemates get on well together and you are likely to create a happy household with tenants that look after the place and stay for longer. Get a cleaner to come every couple of weeks to clean to communal areas. They are also a handy pair of eyes inspecting the property for you regularly.
If you’re an inexperienced landlord or you are time poor then HMO’s may not be the way to go. It’s a steep learning curve, there are a lot more hoops to jump through and it can be a lot of hard work. A good letting agent – such as Caley & Co will be able to give you some guidance and point you in the right direction.
If you’d like to talk about HMO’s, Single Lets or anything else to do with buy to let in Watford then I would love to talk to you to. There is no hard sell and our advice is completely free and impartial. We won’t push our service on you, our knowledge and experience will hopefully speak for itself and should you require a letting agent at any point in the future we’d be happy to help.