Half of HMO landlords say their property or portfolio is their sole source of income.
Just under 30% of landlords who took part in a mortgage lender’s survey owned an HMO property or portfolio. Some 72% of these landlords own HMO properties through a limited company.
Half said they did not have another job and used their property or portfolio as their sole source of income.
Despite some of the complexities of managing HMOs, the survey - by Landbay - found that nearly half of the properties were self-managed by landlords, a third of whom owned portfolios with over 20 properties.
The reason for this more DIY approach could be that the most popular size of HMO portfolio was the smallest, between four and 10 properties, with 34% falling into that category.
The survey found that the highest proportion of HMOs were in London and the South East (47%), followed by the East Midlands.
A spokesperson for Landbay says: “Our survey results show continuing confidence in HMOs. Despite proposed rental reforms and local authority licensing schemes, the market remains resilient. With an ongoing housing shortage, demand is stronger than ever for decent and fairly managed house shares.
“HMO landlords have received a boost from falling utility bills. This means higher net rental which can make it easier to borrow a greater amount against the property’s value. In addition, council tax banding for individual rooms in shared houses has been reversed so HMOs are classed as a single dwelling as before.
“As long as investors do their research thoroughly before making the leap, HMOs can give great returns.”
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HMO landlords have not received a boost from falling utility bills. We may just about have increased rent enough to cover the massive utility price increases we were hit with when all the small utility companies went bust and the contracts we had signed weren't honoured. I had signed up for 12 month contracts about 3 weeks before Symbio went bust. Based on the previous years kilowatt usage I had signed up for what should have been about £8000 of gas and electric for 8 bills inclusive HMOs. That instantly became over £30000 on the price cap tariff I was dumped on. Whereas utility companies could increase prices with no notice and refuse to honour contracts landlords can't do that. We can only increase rent at the end of the fixed term or annually. We can also only increase rent by what the market will stand. We can't just dream up a number we like the sound of as we will have a big void. I managed to increase a few tenants rent by around £25 to £50 a month but most were students so I couldn't do anything with those houses for nearly a year. I had to pay around £20000 more than I had budgeted into the tenancy agreements. On top of the utility price rises we have now had interest rates rises on some of our mortgages. My interest payments went up by over £30000 last year plus the extra £6000 Section 24 tax.
Rooms that were £475 in 2021 are currently £545. An ensuite was £550 in 2021 and £650 now.
We are nowhere even close to where we were 3 years ago in terms of profitability. Right now it can be very marginal if using a house as an HMO is any more profitable than a single household let. If it's an existing HMO and already furnished it probably makes sense to continue but setting up and furnishing a new one may be fairly pointless. Voids are probably the deciding factor.
Mine was the same, but I just put a cap on the Gas & electrical usage and any over spend was split between the tenants at the end of the term.
Given all of mine are student HMO’s I’ve been doing that for years as it protects from the “heating on window open” mentality.
Obvious biggest hit on profitability is monthly mortgages doubling & in some case tripling,
Neil - mine have had kilowatt usage caps for years, which is fine in theory on joint tenancy student houses. It doesn't work on individual tenancy HMOs and would be pretty much unenforceable. I still state a usage expectation in kilowatts and occasionally mention rent increases are partly based on how much effort they have made with energy conservation.
NRLA the anti landlord Association are at it again 3 key Election Asks.
Two I totally reject immediately.
(1) The removal of Section 21 that they didn’t oppose on behalf of its members the very foundation of all Private Letting.
(2) The Anti Tenant / Anti Landlord THE RENTERS REFORM BILL that was dead in the water but still you keep on wanting to resuscitate it against Tenant & Landlord wishes for your own personal gain side kick money streams.
STOP IT AND REPRESENT YOUR MEMBERS is that too much to ASK.
The anti landlord association yes Michael that’s pretty much it
In the past I had 5 HMO properties. They demand a lot of attention. In my view it is money well earned.
I always had a limit as to how much I would pay on utility bills, it was more of a reality check for the tenants. The odd time it went over I just paid it and gave a warning. Not sure if I could have got the money back in any case.
Now let to families, yes less money but a easier life.
If you are thinking of running some HMO's do your research!
Agreed, I had 2 HMO's for 4 years and it was hard work. At the time there were no local agents interested at a fee that would have been viable, and so it was not possible to have a job as well, as the demands of an HMO are unpredictable especially all the extra work when anyone moves out. I now rent 2 and 3 bed houses to families. Massive demand, minimal work.
I solved the job issue by being self employed as a taxi driver for the first 16 years of being a landlord. Made it very easy to wizz round between taxi fares if tenants reported problems and was a good source of finding new tenants. For the last 9 years I've worked on a ZHC in a warehouse. It's a great alternative to a gym membership and is totally flexible around the properties. If I know I have landlord stuff to do I just don't accept work for the previous night. Simple.
I wouldn't trust an agent to put enough effort into tenant compatibility for individual tenancy HMOs. Getting someone the existing housemates are happy with takes quite a bit of effort but keeps churn to a minimum. It works for me as a self managing landlord but I can't see an agent putting in as much thought or effort.
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