First – what is an HMO property?

Regulations determine when a rental property stops being a standard rental unit and instead becomes classed as an HMO. Any property with three or more unrelated tenants, forming two or more households, will be classed as an HMO. The same tenants will also share amenities such as a toilet, bathroom or kitchen.

Why are landlords attracted to HMO property investment?

Renting out HMO’s can be attractive due to the potential for increased profits when done correctly. Unlike traditional rental properties, HMO’s have a higher rental income on average. Properties are let out on a ‘room by room’ basis. This has the effect of capitalising on the asset. However, with this increased potential for greater profits comes greater regulations that surround HMO property. And these regulations can end up costing both time and money. Landlords should research how such costs can mount up as HMO property is not for the faint hearted.

Legal responsibilities for HMO landlords

There are legal standards which HMO landlords face. For example, for all properties with five bedrooms or move and three storeys this may require both planning permission and an HMO licence. HMO properties typically require more time and effort than usual rental properties. If you are considering investing in a HMO property, make sure you have the ability and resources to meet the demands. Also consider seeking expert advice of an HMO letting agent. You may want to consider either their full management or Guaranteed Rent services.

The responsibilities for HMO landlords come under two important pieces of legislation:

• The Management of Houses in Multiple Occupation (England) Regulations 2006.
• Licensing and Management of Houses in Multiple Occupation (Additional Provisions) (England) Regulations 2007.

Regardless of whether your property requires a licence or not, you must conform to the management regulations. A breach of any of the regulatory terms is likely to be approached as a criminal offence. The landlord can expect to face prosecution by the local authority. Convictions are usually dealt with at the Magistrates court and hold fines of up to £5,000 or more in extreme cases.

Who to ask about regulations

Your local council will be responsible for regulating and enforcing the correct management for HMO property. The authorities have the power to introduce individual requirements for licensing. As an HMO landlord, your local authorities should be your first contact point for any queries you may have.

For information on any of the above or advice on anything relating to investing in HMO property within Nottingham, please do not hesitate to call us on 0115 740 1800.

Alternatively, get in touch by emailing us at hello@capitum.co.uk

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What did the government do?

With rental options lacking quality, quantity and value, the Government endeavoured to make changes. In order to support developments in the rental market, they set up a Build to Rent Fund. The loans this scheme offered would cover up to 50% of development costs within this field. It wouldn’t be ridiculous to assume this scheme was a catalyst for the rise of investment within rental property. Although the fund ended in 2016, recent changes meant it wasn’t the end for Build to rent support. The Home and Communities Agency replaced the original fund with a Home Building Fund. This allows more funding for private sector developing schemes, including Build to Rent.

What does Build to Rent actually involve?

Traditionally, house building in the UK, would be aimed at selling flats and houses direct to either householders or landlords. Build to rent, however, provides a foundation for properties to be built and put on the rental market instead. Contrasting to Buy to Let, Build to Rent offers a more long-term approach for income. One-time selling of properties, dependent on the current market, restricts the profitability. Built to rent, on the other hand, generates income over long-term renting. Inspired by the American rental market, companies can have ownership of large collections of homes. They will be able to secure long-term tenants, and consequently rent, and avoid house price fluctuation issues.

What impact will Build to Rent have on the UK housing market?

Build to Rent enables developers to be involved in more projects as they share the risk with the Government. Defined as a ‘fully recoverable investment’, the scheme undoubtedly has attractive traits for many developers and investors. With the state of the current housing crisis, Build to Rent could become a partial resolution. The funding offers improvement of the quality of houses and also more development, aiding the housing crisis.

Why are investors attracted to Build to Rent?

It’s not surprising to find that new rental homes earn higher rents than older properties. Tenants often pay a ‘first move in’ premium. Studies suggest that new builds can attract rents of over a third more than properties that have been around longer. Investors who want to focus on long-term commitments with higher yields should consider Build to Rent. The simpler Buy to Let still remains a popular choice for many investors. However the prospects of a healthier rental income over the longer-term is an attractive characteristic of Build to Rent.

At Capitum we specialise in developing Houses in Multiple Occupation (HMO) in Nottingham for young working professionals.

You can find out a lot more about us here.

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There are stories of people making small changes in order to save money. And then there are others that go ‘all out’ in a drive to get there quicker. The numbers saved can be quite surprising.

We recently came across a tenant (Joshua) who had taken saving for his own home to a whole new level. He sold his car to reduce the cost of personal ownership. Joshua had worked out that by using public transport and taxis (only when necessary) he could make a substantial saving. By taking on voluntary work at the weekend he could also ensure he was too busy to ‘party’. He went on to cancel his gym membership and decided not to join the annual ‘lads’ holiday. He also switched to doing all of his food shopping at discounted supermarkets. Whilst this made for a less than perfect lifestyle the savings were greater than he had originally expected.

Substantial savings

Joshua calculated that by making all of these changes he could save as much as £9,000 a year – no small sum. By his own calculations it would take just three years to save enough for both a deposit and the legal fees to buy his own property. And if his work prospects improved this could be reduced to just two and half years. As we talked, he was even thinking of taking on a part-time evening job to supplement his income. All to help build his savings quicker.

We have also heard stories of people providing a useful service or skill for free in return for receiving the same service free. One example was another of our tenants helping a local gym class instructor. By helping to set up and pack away equipment they received free access to the class.

Other money saving examples include using car share websites.

So desperate is the need for young people to own their own home today that it can become an all consuming target. To buy our own home is still seen as a major step. This is often seen to prove to the World that we are entering adulthood and that we should be taken seriously. Small wonder that we all aspire to own our own home.

The Shared Living & HMO market

Developers have in recent years cottoned on to a growing market for young people wanting a smart shared living space. These properties are typically constructed as a five or six bedroom House in Multiple Occupation (HMO). A HMO property can also provide an instant group of new friends for young people moving to a new City.

At Capitum we see people choose shared living in professional house shares for many different reasons. Top of the list is the affordability our service provides by including all utilities within the rent. These include gas, electricity, water, Council Tax, ultra-fast broadband, communal cleaners and gardeners! You can find out more about us here.

Capitum’s service helps to ensure that there are no nasty surprises at the end of the month. Rather than worry about bills our tenants simply pay their rent and leave the worrying to us. Shared living has in short made life easier for many today.

To find out more about how we provide the best in shared living contact us on 0115 740 1800.

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And what better way to demonstrate this success than with the launch of a new company website. This new site has been created to showcase both Capitum’s work to date and to demonstrate our commitment to working to the highest standards.

Shared houses backdrop

“The UK is witnessing significant changes in the way the Government treats landlords. Whilst Buy to Let played a supporting role in the housing market during 1996 – 2015 there can be no doubt there has been a sea change in sentiment. UK landlords now face a new minimum 3% Stamp Duty tax on second homes. Together with the introduction of Mortgage Interest Relief restrictions coming into place on 06 April 2017 this makes it more important than ever to put new plans in place. These include the possibility of restructuring existing property portfolios and having the right structures ready for new purchases. ”
Garry Slater, Managing Director

About Capitum

Capitum Investments is a forward thinking developer of shared houses for working people. Our properties range from a typical 5 or six bedroom house right up to our flagship 32 bedroom ‘Super-Sized’ HMO in the heart of West Bridgford. We also joint venture with landlords looking for a Guaranteed Rent solution.

The business was established in 2015 to meet the needs of many young people typically struggling to buy their own home. Today tenants choose rooms in our properties for many different reasons. These include relocating to Nottingham for work or looking for a more affordable and convenient ‘all-inclusive’ rent.

You can view our latest house shares here.

Are you a house share landlord who feels now is the time to review your property strategy? If so, please get in touch with us on 0115 740 1800. We would be delighted to hear from you.

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