Are HMOs Too Popular, Too Soon?


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It’s official! HMO properties are the most popular investment property in the UK!

Shawbrook Bank, one of UK’s major banks, recently conducted a costumer survey and they found that 34 per cent of property investors preferred to invest in HMO properties. Terraced housing turned out to be the second most popular investment property with 28 per cent and flats/maisonettes ranked third in popularity at 22 per cent.

Karen Bennett, Sales & Marketing Director of Commercial Mortgages at Shawbrook, explains that interest in HMOs have steadily increased over the past ten years mainly due to the presence of high yielding property portfolios which many are aspiring to emulate.

According to the findings, 72 per cent of the investors who participated in the study admitted that high profit yields attract them to HMOs, while high potential for capital growth and reduced risks of rental voids compared with buy-to-let properties are some additional perks.

Bennett, however, cautions investors that it’s not easy buying HMO property. Investors must be careful when complying with planning and licensing requirements. Moreover they should also watch out for challenges and pitfalls of the valuation process,” she said.

In fact, 50 per cent of the survey respondents admitted that they are still going through the valuations, planning and licensing phases for an HMO property.

One positive contribution HMO’s bring is that these properties can help augment the number of rental properties in the UK. But in the exceptional case of Laura Dwyer-Smith, having too many HMOs in Brighton did not work in her favour.

Residentiallandlord.co.uk reported that Laura Dwyer-Smith- a landlord from Brighton- was served a planning enforcement notice on her HMO property last year under the basis that there were too many other shared homes in the vicinity.

Despite her failure to acquire the proper planning permission, Smith continued to lease her HMO property. Thus, when she appealed the planning enforcement notice to the local council, it was denied.

Councilor Julie Cattell, Chairman of Brighton and Hove City Council planning committee, explained that ‘this recent decision enables the council to prosecute landlords who breach the notice served against them.

Local councils are also raising their concern on the impact of too many HMO properties, according to a report from Cambridgenews.co.uk.

Last year the Cambridge City Council experienced a surge in applications for HMO properties. In one of the council meetings, Council Member Marie Louise Holland raised her concern on the lack of legal standards for HMO property and the potential impact of increased number of residents on parking and council services.

According to Holland, if there are too many HMOs in one area, you’ve got too many people coming and going, and they don’t really care about their neighbourhood. She added that the cumulative impact of HMOs on neighbourhoods shouldn’t be underestimated.

As you can see, the popularity of HMO’s has attracted it’s fair share of detractors arguing about the negative effects of these properties in the community. Given that local councils are monitoring the number of allowable HMO properties in a given area, it becomes even more important for investors to do their homework first on a location before to avoid future legal troubles.

There is still big money to be had in HMO’s, provided you are compliant with the rules.

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