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Residential Property to: BTL vs HMO


Andy Ayim

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Hi all,

 

Really enjoy reading all the topics in this forum. I currently have one BTL investment in Manchester and live in London and face the following dilemma. 

 

Situation: With my mother and brother moving out in the coming months I face the problem of having spare capacity in our residential property.

 

Consequence: With only my younger brother and myself left in the house, it is highly likely we will move out and either rent somewhere new or buy a place to live in.

 

What does this mean?

 

Option 1: I could convert the 4 bed house (5 if I convert the living room to a bedroom), into a HMO ready let, obtain a license and remortgage the house before renting out each room (fully aware of the added stress of HMO's).

 

OR

 

Option 2: Remortgage and rent the house out as a BTL property, for a lower yield than HMO's but with less stress associated.

 

 

The property is in north London...... what would you advise/do?

 

Thanks

 

Andy

 

 

 

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Hi Andy,

 

For a property of that size in North London I imagine the yield wouldn't be fantastic as a single let (would the rent support the level of borrowing you need/want?) but it would rent easily, and there would also be strong HMO demand.

 

Would you be willing/able to self-manage if you went down the HMO route? Finding a good agent who specialises in room lets isn't impossible, but there may or may not be one in your area.

 

That seems to be the trade-off - the extra money v your time - and that's a decision only you can make!

 

Another factor is lending, which is always going to be tougher on an HMO than a single let.

 

What are the main factors influencing your decision at the moment?

 

Rob

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Hi Rob,

 

The yield on single lettings would not be great, but suffice enough to cover borrowing with a small margin. However I am keen to put in the time and effort to let it as a HMO. I know the local market well and have already spoken to two potential tenants and have popular avenues for marketing rooms to LHA/ low pay workers. 

 

I envision upfront it will be capital and time intensive getting the property HMO ready and attracting the initial tenants. I think the real hurdle will be regarding obtaining lending. 

 

I am going to reach out and speak to a few brokers and HMO landlords in the community to better understand the challenge ahead.

 

Thanks

 

Andy

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