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Rob D

Episode 46: HMOs - big returns, but are they for you?

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How on earth did we make it to Episode 46 without talking about HMOs? They’ve become a hot topic in recent years as investors have started to focus on cashflow rather than capital growth, so we thought we’d better correct our omission and give them a full episode.

 

Listen now: http://thepropertyhub.net/tpp046-hmos-big-returns/

 

What are your views on HMOs? Do they fit with your investing strategy, and are there any benefits or drawbacks we didn't mention?

 

Let us know below!

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Informative podcast this week as usual. From speaking to other investors I realised that many people have a mixed bag of investments, such as both BTL's and HMO's.

However I would like to know in terms of HMO's, do investors prefer investing close to home or across the UK as long as the numbers are right?

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My BTO's are close to home. I manage them, not what everyone wants. BTL's, they can be a bit further away, but I kinda like stuff to be close. But, I'm different to most as I also do refurb work and building works, so I can see capital increases in the property I have by doing a quick extension or loft conversion. Which is usually good, because when someone see's you working, you always get offered other work - really odd!!

 

HMO's can be a pain/ can be good. I comes in phases with my tenants. But I only let to professionals or students and I choose them. You get a gut feel for who will be right. I keep the ages of the people in the house about the same give or take 5 years. I also try to have a communal room.

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Hello Rob & Rob,

 

I'm a fan of the podcast and was thrilled to listen to the HMO recently as I have been researching them.  

 

I have gone ahead and found one I want to purchase - it is a licensed HMO.  My issue is that my broker cannot find me an HMO mortgage under 8.99% as a first time landlord… ouch!

 

Looks like licensed HMO's are more difficult to mortgage than a non licences one… I had not realised that.  Here's my question to all - Am I better to buy a house under a regular home mortgage & eventually convert into an HMO?  Do I then after a 2 year fixed mortgage remortgage under an HMO mortgage? or not? How do people break into HMO?

 

I would appreciate your thoughts to help me get my head around this.

 

Thank you

Rox

 

 

 

 

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Looks like licensed HMO's are more difficult to mortgage than a non licences one… I had not realised that.  Here's my question to all - Am I better to buy a house under a regular home mortgage & eventually convert into an HMO?  Do I then after a 2 year fixed mortgage remortgage under an HMO mortgage? or not? How do people break into HMO?

 

 

Yes, options are far more limited on licensed HMOs - especially if you combine that with being a first-time landlord. Not my area of expertise by any means, but it seems likely that you'd have more options if you weren't a first-time landlord at the point of applying for an HMO mortgage (by owning it as a single let first).

 

However, risk factors:

  • You obviously can't run it as an HMO until you remortgage onto a product that allows it, so the numbers would have to work as a single let in the meantime
  • You'd need a Plan B in case lending is no easier when you get to the point of wanting to remortgage
  • If the area brings in Article 4 in the meantime, you're a bit stuffed!

That's just some ideas off the top of my head though - I'll ask around and try to get a proper broker opinion!

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Quick update - I searched around online and found out that I can take out a LLoyds Commercial Repayment Mortgage at a much better rate.  This particular mortgage does not lock me into a fixed term which means in a year or two I can remortgage to a interest only mortgage.  Numbers still seem to work out!  

 

Thanks

Roxane

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