UK Rental Market Update: Insights into the Current Landscape

Welcome to our Property Market blog, where we provide you with comprehensive insights into the current trends shaping the UK housing market. In this edition, we'll dive into key headlines of the current Rental Market - including supply and demand dynamics, challenges faced by investors, rental growth versus earnings, and regional snapshots. Let's explore the latest findings!

 

- Annual rental inflation for new lets in the UK remains high at an average of 11%, slightly down from 12.3% in mid-2022.

- Rental growth continues to outpace earnings growth, raising concerns about affordability for renters.

- The demand for rental properties remains significantly higher than the five-year average, while the supply of privately rented homes in Great Britain has seen a minimal 1% increase over five years.

 

Supply and Demand Imbalance:

- The stock of homes available for rent is 33% below the five-year average, highlighting the significant supply and demand imbalance.

- According to the recent ARLA Propertymark Report, the demand for rental properties recorded by member agents in April 2023 was 24% higher than the previous year, further exacerbating the supply shortage.

- Factors such as rapid growth in overseas students and high net immigration contribute to sustained demand for rental properties. This follows the Government shake-up of Visa rules in 2021 to help attract more skilled workers to the UK.

 

Challenges for Investors:

- The number of privately rented homes has only increased by 1% since 2016, as new investment is offset by properties leaving the rental sector.

- Tax changes, growing regulations, higher borrowing costs, and tighter lending criteria have prompted landlords to reassess their portfolios and investment strategies.

- Mortgage rates have increased, impacting the equity or deposit levels required for new buy-to-let purchases, along with stricter lending criteria and stress tests.

 

Rental Growth and Existing Tenancies:

- Existing tenancies have seen rental increases at an average of 4.4%, significantly lower than the market average for new tenancies.

- Landlords are encouraged to review their rents periodically, especially considering challenges such as tax changes and higher mortgage rates, as rent increases can positively impact investments.

 

Breakdown of the Private Rental Market:

- The core private rented sector, comprising long-term lets, accounts for 66% of the market, offering lower hassle and workload.

- Sub-sectors such as holiday and short lets or HMOs may provide higher yields but come with additional costs, workload, and regulations.

 

Regional Snapshot:

- In the West Midlands region, average rents have seen a year-on-year increase of just under 10%, with Birmingham ranking among the top five cities for rental growth.

- Manchester, Edinburgh, Glasgow, and Nottingham also demonstrate strong growth in rental prices.

 

Conclusion:

The UK rental market continues to experience robust demand, outpacing earnings growth and raising concerns about affordability. The supply shortage persists, presenting challenges for both tenants and landlords. Investors face changing dynamics, including higher mortgage rates and stricter lending criteria. Regular rent reviews are encouraged to ensure investments remain financially viable.

Thank you for reading our Rental Market Update blog. If you are a landlord or property investor and would like some advice or to share your views, please contact me anytime...

 

Ali Durrant MARLA

Director of Concentric Sales & Lettings 

ali@concentricproperty.co.uk

UK Sales Market Update

Welcome to our Property Market blog, where we provide you with insightful information on the latest trends in the housing market. In this edition, we'll focus on the sales market, highlighting key statistics and offering valuable insights for both buyers and sellers.

 

1. Transaction Stats:

In January 2023, there was a 10% reduction in property sales recorded year on year, while new home purchases saw a 9% rise in completions. Mortgage approvals experienced a significant 46% reduction, with gross lending down approximately 7%. The decrease in mortgage approvals from the second half of the previous year largely explains the significant difference in lending statistics.

 

2. Buyer Demand:

According to the latest ARLA Housing Insight Report, there was a 30% fall in the number of prospective buyers registered across member branches in April 2023 compared to April 2022. Additionally, member branches reported a 70% increase in properties available for sale year-on-year. These figures indicate a drop in buyer demand, likely influenced by higher mortgage rates and economic challenges affecting affordability.

 

3. Market Activity and Pricing:

Rightmove reported that agreed sales numbers are currently just 3% behind the pre-pandemic market of 2019. The average price of properties coming to the market experienced a 1.8% month-on-month increase in May, reflecting robust activity levels and confidence. Sales agreed in May showed positive growth, and the level of negotiation from the asking price to the sale agreed price remained steady at around 3%.

 

4. Mortgage Rates and Affordability:

Despite an increase in the Bank of England base rate, mortgage rates have remained steady. The average 5-year fixed rate with a 15% deposit is now 4.56%, significantly lower than the 5.89% recorded last October. This decrease in mortgage rates contributes to maintaining home mover confidence in the market outlook.

 

5. House Price Growth and Market Activity:

The Zoopla house price index reveals a year-on-year price growth of 1.9%, the lowest in recent times compared to the 9.6% recorded a year ago. Prices have fallen by an average of 1.3% in the last 6 months due to higher mortgage rates and rising living costs. However, buyer confidence has improved, resulting in an increase in sales agreed, primarily driven by falling mortgage rates during the Spring.

 

Regional Property Price Movements:

The West Midlands region has seen year-on-year price growth of 3.5%, surpassing the national average of 1.9%. Birmingham ranks second among major cities, with a growth rate of 3.8%, just behind Nottingham at 3.9%. These figures indicate a significant difference compared to last April when the year-on-year price increase approached 10%.

 

The Outlook for the Sales Market:

Market activity in the UK sales market remains comparable to pre-pandemic levels. However, predictions suggest that mortgage rates may increase in the second half of the year, impacting affordability and pricing. It is anticipated that the year-end may see approximately 20% fewer transactions than the previous year. Sensible and realistic pricing is crucial for sellers, while buyers should not be discouraged as long as the numbers align. As the year progresses, increased stock levels may provide negotiation opportunities.

 

Conclusion:

The UK sales market demonstrates resilience, with activity levels approaching pre-pandemic norms. Understanding market dynamics, considering pricing strategies, and staying updated on mortgage rate changes are vital for both buyers and sellers. Seek professional advice and remain adaptable to navigate the ever-evolving property market successfully.

Thank you for reading

The Must-Known Legislation To Let A Property Compliantly

Landlords, are you aware of the two main pieces of legislation that you need to comply with to remain safe and compliant? 

In the ever-changing private rented sector, it can be difficult to keep up with the latest laws and regulations that govern this space. However, failing to meet the government’s requirements can result in serious consequences in the form of; notices, fines and prosecution.

That’s why we at Concentric Sales and Lettings are focused on helping you get the compliance information you need on all aspects of Landlord law. In this blog, we’re going to dive deeper into the two pieces of landlord legislation designed to ensure the safety of your tenants within your private rented properties. These two laws are The Landlord and Tenant Act 1985 and the more recent Homes for Fitness & Habitation Act 2020.

 

The Landlord and Tenant Act 1985

Section 11 of the Landlord and Tenant Act 1985 details a landlord’s obligation for repairs. Simply put, as a Landlord, you must ensure the safety of your rented properties.

Specifically, you must ensure that the air, space, water, and heating of the property are properly maintained and kept safe. The law also clearly states that you must carry out repairs on your properties as and when they are due. 

This brings up the question – when are repairs due? 

The legislation states that repairs should be carried out on a “reasonable timescale” based on when you are first notified of the repair requirement. “Reasonable” is somewhat subjective and difficult to define but generally depends on factors such as (a) whether or not the tenant is living in the property and (b) whether or not the severity of the repair warrants an urgent response.

Major repairs (as in water gushing through a ceiling) are required to be acted upon immediately. You, as a Landlord, should take all reasonable steps to carry out any maintenance work or repairs to the best of your ability. Some repairs may take time to be rectified, but as long as you have taken the steps that you can take, the law will consider it reasonable. 

 

Protect Yourself Against Claims

We recommend that you always act as quickly as possible when carrying out repairs for your tenants. This is not just for the comfort of your tenants within your rented property. It is also one of the best ways to protect yourself from potential claims that the tenant may choose to pursue against you. 

Under the law, tenants have the right to report any outstanding maintenance issues to the local authority. The council may then decide to carry out a full inspection which can often lead to a much longer list of repairs. 

It’s important to remember that you are not the only person given responsibilities under Section 11. Tenants are also obligated to “behave in a tenant-like manner”, meaning that they are required to take care of the normal maintenance activities that keep the property clean and functional. This includes things like changing lightbulbs, keeping the drains clear, cleaning the gutters, and other similar activities. Now that we’ve covered the first piece of legislation for landlords let’s cover the second, more recent law. 

 

Homes for Fitness & Habitation Act 2020

This law does not replace the one we’ve discussed but creates additional rights and responsibilities. Generally, it focuses on areas that are not necessarily covered under the Landlord and Tenant Act 1985. There are two key factors you should be aware of when it comes to this law. 

First, this act gives tenants the right, for the first time, to take a Landlord to court for not maintaining their repairing obligations. The government has removed the requirement to first go to the local authorities and has enabled the tenant to go directly to the courts. Landlords must be aware of this change.

Secondly, Landlords are now responsible for hazards and repairs within communal areas throughout the tenancy. You are obligated from the moment the tenancy begins through to the conclusion of the tenancy to ensure that the property is fit for human habitation at all times. The only way to achieve this is through regularly inspecting the property. You must not rely on tenants to report repairs because they do not always do so. 

 

Final Thoughts

Your main focus as a Landlord should be to ensure that your tenants are safe at all times. Failure to comply with these laws can result in; prosecution by the tenant in court, penalties issued by the local authority, fines, and improvement notices that can restrict your right to gain possession of your property. 

With over 170 different pieces of legislation regulating the private rented sector, you may be wondering how to be compliant as a Landlord. 

Fortunately, we have created several resources to help you stay safe, compliant, and up-to-date. That’s why we run a quarterly webinar hosted by Dawn Benett, where we spend 2 hours diving deep into various pieces of legislation that you need to know about. Click here to register for FREE today!

Should Your Address Be On A Tenancy Agreement?

Landlords, did you know that there are over 170 separate pieces of legislation that directly impact the private rented sector? Here at Concentric, one of our big goals is to help educate you to be able to navigate this maze of rules and regulations so that you can stay safe and compliant. 

While you may prefer not to share your residential address with your tenants, did you know that there are laws that govern whether or not you are permitted to withhold your address? The two main rules that apply to your address are Section 47 and Section 48 of the Landlord and Tenant Act (1985). Let’s get into them. 

 

What Section 47 Means To Your Tenancy Agreements

Let’s start with Section 47. Section 47 of the Landlord and Tenant Act of 1985 states that a landlord’s address must be present on all documents that are, in fact, a demand for payment. The document that most commonly falls within the purview of this legislation is your tenancy agreement. This means that you, as a landlord, have a legal obligation to include your residential address on your tenancy agreement. Is your address present on your agreement currently? If not, you could be falling foul of this regulation. What does this mean? 

Your tenants are not legally liable or responsible to pay any rent they may owe you until you have shared your residential address. The law is clear. If you’re using an agent, you are not permitted to use your agent’s address. Rather, the address on the agreement must be the landlord’s residential address, wherever that is in the world. The reason this legislation applies to the tenancy agreement is that it is, in the eyes of the law, a demand for payment. Until and when you have provided your residential address, the tenant does not legally have to pay. It makes sense that you, as a landlord, may feel some reservations about having to share your home address with your tenants. However, in the private rented sector, this is a given right that the tenants have been legally granted. Section 47 grants tenants the right to identify the person from whom they are renting. 

Moreover, if the tenant makes a formal demand, in writing, to you as the landlord or your agent, each party is obligated to respond to that request within 21 days. As we have already mentioned, failure to supply the information within that timeframe could result in the tenant refusing to pay rent until the information requested has been provided. In that situation, the tenant would be in their full legal rights to withhold payment from you, the landlord. 

 

Why You Need To Know About Section 48

The other significant rule that impacts whether or not a landlord must share their address is Section 48 of the same law. Again, this section focuses entirely on the landlord’s address. However, in this case, the legislation refers to an address being given to a tenant in England or Wales for the sole purpose of serving notice to that tenant. In this case, landlords have more flexibility, as the address can be that of your agent or your place of business, depending only on your preference. If you are a company landlord, then the address to provide tenants, under this section, would be the registered address of the business.

Ultimately, these sections of the Landlord and Tenant Act of 1985 do not carry penalties or fines if you are in violation. However, that does not mean that they are inconsequential. The ultimate penalty could be that your tenant simply chooses not to pay the rent. In that event, the law would not require the tenant to pay until the residential address of the landlord was provided. 

 

Conclusion

To recap, Section 47 places a clear obligation on landlords to provide their residential address to their tenants on their tenancy agreement and on any other documents that are payment requests. Section 48 requires that landlords share their business address (or the address of their agent) when serving notice to tenants, only when the tenants reside within England or Wales. 

We hope that you’ve found this information useful. It’s important to always stay informed about legislation so that you can remain in compliance and continue to serve your tenants. If you’re curious about where you can get more information on the latest and most important legislative updates, our very own Dawn Bennett hosts a quarterly webinar where she drills down into a variety of the many pieces of legislation that apply to our industry. 

What you need to know about the immigration act 2016 (2022 changes)

Are you aware of the changes that were made to the Immigration Act 2016 that just came into force in April 2022? The laws surrounding the private rented sector are changing all the time. As a landlord, it can be difficult to keep up with the many hundreds of different laws. However, you understand that there can be serious consequences if you fail to do so. Lettings law is serious. Here at Concentric Sales and Lettings, our goal is to help you by keeping you up to date with all the changes. We’re here to give you the knowledge and practical tips you need to always remain compliant.

So, without further ado, let’s get into the Immigration Act and the 2022 changes.

 

What is the Immigration Act of 2016?

The Immigration Act is a piece of legislation that applies to landlords and letting agents and came into force in England on February 1, 2016. The goal of the law is to ensure that properties are not rented to tenants or occupiers who do not possess a right to rent in the UK. Specifically, the legislation states that a landlord and/or a letting agent must be able to prove any occupier’s right to reside within the property throughout the tenancy. This means that landlords must check that any tenant or occupier within the property has the right to rent in the UK before the tenancy starts. This law applies to every adult who is 18 or more years old and who is living within the property, whether they are named on the tenancy or not. 

How to verify the right to rent

The most important part of the Immigration Act is the requirement that you verify your tenant’s right to rent in the UK. You mustn't discriminate when checking the occupant’s right to rent. Ask each of your tenants, regardless of their backgrounds, to provide the same evidence – namely, that they have the right to reside on the property. The easiest way to prove the right to reside in the UK is by presenting a passport. If it is a UK passport, you have all the evidence you need to prove that the tenant has the right to rent for the duration of the tenancy. If your tenant is from the EU, the process is a little different. In this case, their right to rent can be verified through the government website online. To do this, all you need to do is ask for a share code from the tenant or occupier. Using this code, along with their full name and date of birth, you can conduct an online rent check. Here is where you can do that. Finally, if your occupier is from outside the EU, other documentation will be required to verify their right to rent. Often, tenants from outside the EU prove their right to rent by showing a passport with a supporting Visa that shows the data the tenant or the occupier entered the UK and the expiry date of their visa. For any tenant or occupier that has a limited time to remain, you are required by law to conduct a follow-up check after completing the original right-to-rent check. The follow-up will need to be carried out either upon the date that the visa expires or 12 months after you carried out the initial check, whichever comes last. What this means is that you could, in theory, legally move a tenant into a property today, when their visa expires tomorrow. This wouldn’t be a violation of the law, but it might not make sense for you as a landlord. Therefore, you need to consider all the facts about a tenant’s right to rent before starting the tenancy. Some tenants may not be able to fulfil the fixed term of their tenancy. 

Landlords must keep documentation and evidence that the right-to-rent checks were carried out at the start of the tenancy. Also, landlords should keep records of any follow-up checks that were conducted while the tenant or occupier was living on the property. Finally, the right-to-rent requirements apply to all occupiers as well, so we recommend conducting further checks to ensure that no unauthorised occupants are living on the property.

Two big changes in 2022

Originally, the Immigration Act required these right-to-rent checks to be held face-to-face. However, due to recent events, for the past two years, we have been able to conduct right-to-rent checks via video call. The first big change to the act is that this amendment has been extended to the 30th of September 2022. The second big change is the alterations that have been made regarding biometric residence permits. Biometric residence permits are documentation that we have now used for many years for any tenant or occupier that has a set amount of time to reside. Based on the 2022 changes, these documents are no longer sufficient to demonstrate a right to rent in the UK. Tenants or occupiers that rely on these permits will also need to provide a share code just like EU nationals so that you, as the landlord, can verify their right to rent online. 

Stay compliant, stay safe

Although landlords are not immigration officers, this law is an essential piece of property law that you must comply with. This regulation carries with it fines of up to £3,000 per occupier and, potentially, a prison sentence. However, by ensuring that you are checking both your tenants and occupiers for their right to rent in the UK, you can remain safe and compliant. The Immigration Act of 2016 is just one piece of legislation in our private rented sector that you as a landlord should be aware of. If you’d like to learn more, feel free to join our FREE quarterly webinar hosted by our very own Dawn Bennett, where you can get more detailed information about the laws and regulations that you need to know.

 

Landlords Heading To Liverpool As The City Property Market Booms

A new report has revealed Liverpool is the place to buy for landlords – but anyone looking to add to their portfolio should act quickly, as property prices are on the up faster there than in other locations.

The report (commissioned by London’s Beauchamp Estates and Liverpool’s Logic Estates, with analysis by Dataloft) describes the city as a ‘regional powerhouse’, stating residential property prices have risen more quickly than anywhere else in the last five years – including the capital.

But this surge shouldn’t deter potential investors, because prices there are still affordable compared to other key locations. The report looks at the Liverpool Waterfront, where an average-priced apartment would cost just under £240 per square foot. This compares to around £353 (per square foot) for a similarly well-positioned property down the road in Manchester and £678 (per square foot) in London.

Buy-to-let landlords are also collecting higher rental yields – with an average of 6.4% across all apartments in Liverpool, compared to 5.5% in Manchester and 4.5% in London (of the cities included in the survey, only Leeds saw a higher rental yield for all apartments, sitting at 6.7%).

And there are also seemingly more renters to attract – 55% of the city’s population live in private rented accommodation, compared to 27% in the capital and 17% across England as a whole.

However, while this report extols the virtues of buying in Liverpool, it’s worth noting that there are multiple favourable locations which have emerged as key investment hotspots in recent reports.

The Buy To Let City Tracker research undertaken by Aldermore Bank saw Bristol top the list of best places to purchase an investment property, based on indicators including average total rent, short and long-term returns, percentage of vacant housing stock, and number of renters.

Second place was Oxford, with Cambridge coming third, followed by Manchester and Luton to complete the top five.

And in a third piece of research – this time conducted by Compare the Market – Birmingham topped a list of the 20 best places to be a landlord in the UK, with Bradford, Coventry, Bolton and Burnley also making it into the top five.

The Minimum Energy Efficiency Standards You Must Comply With As A Landlord

As landlords, there are so many different laws, regulations, and standards that you need to comply with to avoid penalties. Plus, new legislation is constantly being added, further increasing the complexity of this space. Here at Concentric Sales and Lettings, we’re here to help guide you through the maze of rules and get you the information you need to stay safe, compliant, and up-to-date. 

Speaking of compliance, does your property/tenancy have an EPC rating of “E” or above? As a landlord, are you confident that your properties are compliant with the minimum energy efficiency standards (MEES)? In this article, we dive into what these energy efficiency requirements mean for you. 

What Are MEES?

Minimum Energy Efficiency Standards (MEES) first came into force in 2018. The standards focus on the energy efficiency of your property. Energy efficiency refers to the ability to use less energy to get the same amount of work done. With a higher energy efficiency rating, your property means that less energy is wasted and also can reduce energy costs for your property. 

What Does This Mean For You As A Landlord? 

The main MEES requirement for landlords is that any property that you own and rent out needs to have an energy rating of “E” or above. If your property falls below an “E” rating and you are not in receipt of an exemption, you are illegally renting out your property and could be subject to fines and penalties. The government expects landlords to spend a maximum of £3,500 to ensure that their properties are compliant. 

What If My Property Cannot Be Made Compliant? 

In the case that you are renting out a property that is not and cannot be made compliant, then we would recommend you head over to the government website and see if your property falls into one of the categories that are exempted from the energy efficiency requirements. 

You must be prepared to meet these standards. There is talk within the industry that the MEES will be higher in 2025 than it is now. It is currently being proposed that landlords’ properties will have to be a “C” rating or above. This could have a huge effect on many landlords. Fortunately, various funding opportunities are available to you as landlords and tenants right now and maybe more in the future too. We recommend seeking out that funding so that you can offset the costs that may accrue as a result of bringing your property into compliance. 

The EPC Requirement

Part of the MEES is the EPC requirement. The term “EPC” is short for energy performance certificate. It is part of the government’s rating scheme to describe the energy efficiency of buildings and properties. The ratings range from “A” (very efficient) down to “G” (inefficient). The EPC rating is how you as a landlord prove that your property complies with MEES. Providing a tenant with a valid EPC before the start of the tenancy is required under the Deregulation Act of 2015. Failure to provide them with a valid EPC would restrict your ability to serve a valid notice on them for possession of the property should the need arise. So although this piece of legislation may not seem that important, you need to ensure that you comply. 

The Penalties For Failure To Comply With This Piece Of Legislation Are Hefty, With A Maximum Fine Of £5000 Per Property

The size of this fine depends on the time that you let the property non-compliantly. EPCs are valid for ten years and, on average, cost less than £100. This means that for less than £10 per year, you could avoid that penalty and ensure that your property complies with the MEES regulations. Fortunately, it is also easy to get an EPC as there are EPC assessors in your area that can be found online and can carry out the job for you to ensure that your property is compliant and safe. It’s important to remember that funding is available at the moment for both landlords and tenants, so please be sure that you are researching any local funding within your area to improve the energy efficiency of your property. This will also help you to prepare yourself for the even higher requirements that may be coming in 2025. 

Always Remain Compliant

We hope you’ve found this post informative and enlightening. If you want to learn more, check out our YouTube channel, where we help keep you up-to-date on the latest and most important legislation for the private rented sector. There are over 170 pieces of legislation that you as a landlord need to comply with. That’s why we offer a free, quarterly webinar hosted by our very own Dawn Bennett, where you can get more details on all these different kinds of legislation. We’d love to see you there! 

Are Your Tenants Behaving In a Tenant Like Manner?

Where does the term ‘tenant like manner’ come from?

Back in 1953, there was a case brought to court to settle a dispute between a landlord and a tenant. The landlord brought forward a case that on vacating the property, it was left in such a state of demise that he believed that the tenant should be held responsible for cost of repairs. The argument was that there are some jobs which should not fall under the care of the landlord, but in fact should be taken care of as a matter of course while the tenant occupies the property.

When the judgment was made, the term ‘tenant like manner’ was phrased, and it was made clear that a tenant has a responsibility to treat a property with care and respect, and that they must ‘take proper care of the place’.

 

What are the tenants’ responsibilities in behaving in a ‘tenant-like manner’?

Let’s firstly put it out there that the majority of tenants are happy to take responsibility for basic jobs around the property. But it is worth noting that there are a very many complaints which could be avoided, if the tenants were fully aware of what their responsibilities are while they occupy a property.

A good example of this is damp. I’d gauge that there a very few landlords who haven’t at some point had a tenant complain about damp in a property, but did you know that the majority of these issues are, in fact, caused by the tenant?

That might surprise you – but there are numerous cases where the tenant causes damp issues inadvertently by drying washing indoors, failing to properly ventilate bathrooms and kitchens, not making use of ventilation fans etc.

There are many ‘little jobs’ which are simple for the tenant to take care of, and which go a long way in maintaining the comfort and structure of the property. Those expected of the tenant under the law are:

 

There are some jobs which are beyond my tenants’ expertise – what if they refuse or cannot do them?

OK, so you’ll recognise that jobs such as re-pressurising the boiler, dealing with pests, or unblocking drains might not be such simple tasks for the average tenant. But it’s important that they recognise that these tasks are not the responsibility of the landlord, and so should make efforts to find a tradesman or handyman who might assist with these kinds of jobs. Generally, as a tenant, they should be expected to deal with tasks which they would comfortably be able to handle if the property were their own – if it’s something that as a property owner, they wouldn’t pay someone else to do, then it’s feasible that they can take on those kinds of things themselves.

As a landlord, you should also make efforts to ensure that the tenant is well equipped to deal with things such as re-pressurising the boiler and bleeding radiators, and should provide full instructions for those kinds of tasks. Then it is up to the tenant to decide if he is comfortable in doing those, or whether to ask for assistance.

There are some items on that list that I’d happily do for my tenants – am I wrong?

It’s true that there are some landlords out there, particularly those who have reasonably small portfolios, who are quite happy to be on call for sorting out small jobs for their tenants. And of course, that’s fine. But don’t let it become an additional expense to you – remember that even those little jobs add up. Your tenants should always know that you’re doing these things out of kindness and concern for the upkeep of your property.

If you are looking to keep all your properties safe by staying compliant with current legislation, click HERE to download our FREE compliance checklist.

What Should You Look For When Buying A HMO?

Given the right area, investing in a HMO can be a great way to increase the yield of a property, and a way to boost your portfolio. But whether you are new to the property game, or are a seasoned landlord looking for a different route, what should you be thinking about when you are looking for a HMO?

About HMO’s

There are many reasons why landlords are attracted to the HMO market – in the right location, they can give a much larger return than a general family property, because they are leased as individual rooms or spaces rather than as a whole. This means that you are in effect renting out several dwellings in a property, rather than just one.

Generally, there will be two routes to get you there. You can either look at purchasing a property which is already set up as a HMO, in which case the layout is much less, or, you can look for a property where you can convert a property from a single dwelling/single use into a HMO. If you’ve got the money to put down in doing this, you are able to create the space however it works for you, geared towards a specific market, and can potentially make some more money selling it on as a HMO.

Traditionally thought of as student accommodation, HMO’s are also becoming more popular in affluent city centre locations, where rents are higher, and young professionals are looking to keep costs down by house-sharing.

So areas surrounding universities are still very popular, but also consider areas where young people are starting their careers, and perhaps might be searching out house shares while they are still single and forging their own paths. This also has the additional benefit of allowing landlords to seek out more expensive properties, which are more likely to have a higher yield as a HMO than as a family home.

What type of property makes the best HMO?

If you have no experience in the HMO market, you might think that you have to seek out a specific type of property for you HMO – something large, with a minimum number of rooms of bathrooms – but actually, that’s not necessarily the case. In fact, almost any type of property can be converted into a HMO.

Under law, a HMO is defined as being a home rented by three or more tenants who are not part of the same household/family. So in theory, even a small bungalow, for example, could be considered as a HMO, if shared by three people, providing the correct criteria are met.

The main things you’ll need to think about are choosing the correct location, and whether you have the vision and skill to make your property work as a HMO. Location should always be the key factor.

Do I need a HMO licence?

In most cases, yes, you will need to apply for a HMO licence. Currently, the criteria are:

Any of these will require you to hold a HMO licence, although you should always check with your local authority, as some areas have slightly different rules.

Are HMO’s harder to maintain?

HMO’s are usually rented by students or young professionals who typically are looking for short-term accommodation, whether that’s based on the academic year, or the term of a work contract etc. As such, you will normally find that your HMO turnover, in terms of tenants, is higher than it would be for a normal dwelling.

While that might mean that you’re more likely to fill the property quicker, it also means that due to the temporary status of the accommodation, your tenants are less inclined to put their efforts into general maintenance of the property, and this means that you will have to put more time, effort, and money into cleaning up after they vacate.

As well as this, the shared areas, such as kitchens, bathrooms etc. will have a much higher general usage than in a normal house, so there will be much more wear and tear on things like carpets and flooring, furnishings, and appliances.

It’s worth considering, if you’re thinking about taking on a HMO, that they do require more upkeep on a regular basis, and so those expenses need to be taken into consideration.

Converting into a HMO – is it worth it?

If you are in an area where demand for shared accommodation is high, and you’re thinking about converting a property into a HMO, there are some factors to consider.

You will need to ensure that the property has adequate space for your tenants, and is safe, clean and habitable. You will be subject to spot-checks by the local authority, and any failures in standard could lead to your licence being revoked, as well as a hefty fine.

Also consider whether you will want to make use of spaces such as living rooms as additional bedrooms – many landlords do this to maximise the rooms they can rent, but it’s also important to consider the communal areas – is there adequate living space to allow for an area for your tenants to gather and sit? If you have a kitchen diner, you might want to use the dining space for a lounge or seating area for them to relax.

If there is a garage attached to the property, there is possibly scope to add another room/bedroom. But you will have to seek planning permission, so get advice from your local council before doing this.

Marketing Has Changed – Have You?

One of the biggest lightbulb moments for people who attend our courses is this: The most vital thing you can do to grow your business is to have a sound marketing strategy and to be consistent with it. But often, when things get busy for us, marketing is the very first element of our business that we neglect. It’s unfortunate that it has become one of those things that we all tend to put on the back burner, something that we know is kind of important, but it can wait until we’re less busy.

There is a real danger in adopting this strategy though, because what ends up happening is you get tied up in a ‘feast and famine’ cycle. If you only tackle your marketing when you feel that you have to (i.e. when you see a drop in clients…and income), then you’re always going to have an inconsistent income.

On top of this, marketing is one of those subjects that is ever changing and evolves quickly. Trends change, technology changes, and if you’re not keeping up with it, your current marketing strategy can quickly become stale.

So what can you change – today – to make sure that your lettings business continues to grow?

Focus on one thing

On those days when you’re short on customers and you are desperate to get new business through the door, it’s easy to use a scattergun approach and try to do EVERYTHING. But stop – is this really the best strategy?

We’re constantly being told that we need to adopt social media, we need to be writing blogs, we need to be advertising in the press, doing trade shows…  but the problem is, we simply can’t do it all. If your marketing is haphazard then it’s not going to have any effect. What you need to do is choose something that you can truly put your energy into and focus on that, at least to start with.

There are two elements to think about here; what are your natural talents, and who are your customers? If you can answer those two questions truthfully, then you are part-way to finding the right way to market your business.

Who are your target audience?

Something that we tend to like to focus on when we talk about how to market a lettings agency is finding our Ideal Client, or AVATAR. If you have a clear idea of who you are targeting, then it makes implementing your marketing strategy so much simpler, because you know exactly who you’re talking to.

Gone are the days when we advertised to our general audience – that really doesn’t work anymore. Your customers are more savvy – they know what they want, and that’s a PERSONAL SERVICE. You need to figure out who they are, and talk to them like they are the only customer. Don’t preach to a crowd – talk to ONE PERSON.

You can be pretty specific on this – it’s much easier to have a real person in mind… even if they are completely fictitious!

How do you WANT to market?

We are really fortunate that we live in an age where there are so many options available to communicate. Snail-mail and phones are still very prominent (and should be), but we also have many other ways to talk to people now – email, social media, live video, blogs… the question is, what do you want to focus on? Which tool do you believe that you can use with the most passion and sincerity?

Think about what you’re good at. If you’re a terrible writer, then it might not be a good idea to create a blog. If you’re a whizz at social media, however, then make that your focus. Got a talent for taking photos? Use Instagram, or make impactful features or ads on Facebook. If you’re always reading industry specific news, share it with your followers and become known as an industry expert. Write up reports and articles and share them on LinkedIn, or on your blog. Something got your goat? Talk about it on a video – most social media sites now have the option of creating live videos.

Set a schedule

The one thing you have to establish in your growing business is when you’re going to do your marketing. If you’re not consistent, it’s not going to work. You have to be strict on this – it’s important.

Work out exactly what you’re doing with your time. If it helps, write down what you’re doing every day, what time, how long for, and how important it is. You could install an app such as Rescue Time to see exactly where your time is being spent – and find out just how much of your day is wasted on unproductive tasks. Once you know this, you can find some space to slot in some regular marketing.

Put it in your diary – whether you’ve allocated half an hour or a couple of hours or half a day, stick to it. Make it an unnegotiable task every day.

Get your team involved. If you’re using social media, get them to share your posts to expand reach.

Think outside the box

This is one thing we definitely advocate – we don’t want to be the same as every other letting agent. Being the same doesn’t help us grow. We have to stand out, we have to get noticed. So what can you do that’s different to all those other high street agents?

Look at your competition – how are they marketing? And what can you do that’s different to what they’re doing? Use your imagination!