Setting up an HMO

Setting up an HMO

What is an HMO?

An HMO is essentially a house share, whereby a group of unrelated individuals rent rooms in a house and there are shared areas such as a kitchen, bathroom and living area. It is well known that managing an HMO can be challenging, due to a higher number of tenants than a standard let and because of this – more often than not, a high tenant turnover rate. However, there is a reason why many people are deciding to take on HMO’s and that’s down to the much higher rental premiums that can be achieved. To give you a better idea, from our experience HMO’s outperform standard lets by almost 40% on a net income basis.
Where do I Start?

Firstly, you need to find a suitable property for your HMO, checking the relevant council guidelines to make sure an HMO in the area is viable.
• Speak to the council to get a better understanding if there are currently HMO’s in the area and what the chances of a successful application are.
• Go on websites such as SpareRoom.co.uk to see if there are other properties on the road that are currently HMO’s
• Check what each room is achieving in terms of gross rental and what amenities are included in that rental
Once you have carried out this process, you can use the monthly costs below to estimate your net monthly income and whether the property is viable.
Getting your property up to scratch

There are a number of reasons people choose not to go down the HMO route, one of them being the amount of additional works that must be done to the property to pass building control regulations & get your HMO licence.
For most properties putting up a partition in a living/dining room in order to create an additional room is key to making the HMO viable. This amongst other renovations including the installation of a suitable boiler & electrical installation and potentially an additional bathroom which all come at a substantial cost.

Below are a few other health & safety requirements for HMO’s in Hertfordshire:
• Fire doors fitted to Kitchen, Living room and any letting room/bedroom
• Half-hour fire resistant and comply with BS 476
• Must have thumb turn locks inside
• Must be self-closing
• Must have intumescent strips
• Emergency lighting (1 light on each landing will usually be sufficient)
• This is not mandatory on properties less than 4 stories however is good practise and pre-emptive action against councils bringing in further regulation on safety
• Fire alarms in all bedrooms, corridors and communal areas & heat alarm in the kitchen
• All alarms should be integrated preferably but this is not a requirement for most HMO’s
• Annual PAT testing of all appliances in the property

What monthly costs are there?

Based on a 5 bed property in Hertfordshire with a gross rental income of £2,500 (£500 per room)
Letting agents fees (10%): £250
Insurance: £20
Utilities: £150
Council Tax: £120
Broadband: £40
TV Licence: £10
Cleaning: £100
Maintenance/Voids (10%): £250
Total Running Costs: £940
Of course most people will have a mortgage on their property however this will vary largely based on the cash you have available to fund the deposit on your property.

Licencing

Although it depends on the council, within Hertfordshire landlords currently need an HMO licence if a property has:
• Three or more storeys (this includes cellar, basement, shops and loft conversions)
• Five or more tenants forming more than one household.

The cost of a 5-year HMO licence varies depending on the number of people you plan to have in your HMO and ranges from £900 up to £1200.

Here’s a list of items that you will need prior to applying for your licence:
• Evidence of the permanent residential address and National Insurance number of the proposed Licence Holder
• Evidence of the permanent residential address and National Insurance number of the proposed Manager
• Provide the date that the property became licensable
• Fire Alarm System installation and commissioning report.
• Fire Alarm test Certificate
• Fire Risk Assessment
• Emergency Lighting installation and commissioning report.
• Emergency Lighting test certificate
• Valid Landlord’s Gas Safety Certificate
• Electrical Installation Condition Report (ECIR)
• Valid Portable Electrical Appliance Test certificate (“PAT test”)
• Energy Performance Certificate (EPC)
• Sketch Plan
• Legionella Risk Assessment

Hopefully this has given you a brief but good understanding of how to set up your own HMO within Hertfordshire.

By |2018-05-09T12:39:47+00:00January 17th, 2018|HMO's|1 Comment