HMOs or Housing in Multiple Occupation is a more and more tightly regulated investment vehicle. This is a very good thing from an investment point of view it is not a good thing for the maket. If the events in 2020 have not made you realise it the game is rigged and HMOs are riigged too. You can take full advantage of the rigged sysyem.
The ystem is rigged in order to create ad preserve a monopoly. This is one of the reasons for me to invest heavily in this asset class.
There are a number of ways to ensure your investment is protected in HMOs and the goverment had made sure you as an investor are indeed protected.
Why are HMO so financially Valuable and Viable investments
First and formost HMOs are a very good investment without the need of any regulation, red tape, any special skills and so on. They are very good because they present several finacial advatages for those willing ot rent a roiom.
Advatgae 1. No council tax and biulls included. This is not somethign you want to kae lightly this is a grerat advantage! If you want to rent a flat or house. you will have to fork out: council tax over 100 ppound a month, Wifi costs it can range from 30 pounds to 60 puds, Gas from 150 to 150 pounds amonth depending on usage, electricity 150 to 200 pound a month, water rates, plus the rent. You will end up spening as overhead in the region of minimum 700 to 800 punds a months just to keep a roof over your head and nothing else. This is insane! Whereas if you only rent a room you can spend from a minimum of 280 permionth to 450 depending on location, quality of accommmodation whether you have an ensuite room etc. And on top of this all bills are included. No worries for keeping th eheating on longer lights on longer etc.This for a single person
Therefore if you want conveninece, peace of mind and save tons of money in rent, living in shared accommodation is the best option. This is an otpion especilly suitable for young porfessionals, students and migrant workerks or porfessionals of any age. Over the years we had all sorts of renters in our HMOs, they were especilly young however we also had a goodd number of over 40s renting our rooms for literally years and years. This is due to the convenenicene of this type of accommodation.
Safety of HMOs from the perspective of an investor.
I know that it might seem contraintuitive, however an HMO is more protrected from vandalism from th etenants, from burglaries and any other type of dmanage than any other type of accommodation. I have aflat in paisley that I have rtented for several years know, this hd been subject ot meter bypass,, various vandalism of different types, however neve too bad to make the investment not viable. On the other handvery little porblems have arisen from ny HMOs for several years now. This is simpley because there are dirrefent peoeple liviung in the same building all at once. If someone in an HMO wants to start either willinging or unwillinginly while drunk to destroy the house then all the other people will be alertet, do you think that the sheer fact of having other poepl finding outr what you had been up to is not a great deterrant? It is such a deterrant that overt the years we never had any major issues with none of our HMOS. We even still have all the TVs we boughtover 10 years ago stgill in the rooms. I rememnber someone telling me that if I put tvs in the rooms in the area of linclon we have the HMO the TVs would have certainly been nicked. This had bnever happenend.
Rent arrears and evictions.
I guess this iis a hot topic. Many amateurs landlords are moving away from the long terms rental market fue to the ferar of rent arrears and the cost of evicting a tenant who refuses to pay and refuses to move at the same time. I do not know excactly why , it maybe the quality of accommodation, it maybe the due diligence i perform before taing anyone on, maybe the fact that the rent is always slightly below the market value for tyhat specific type of accommodation. The fact remains that over the course of more than 10 years I had never to evict anyone. Yes I had some rent arrers but never that bad to compare with any of the orror stories that you seen on the British Brainwashing Corporation. Remeber after all that the BBC does not want the public to believe investing inrfeal estate is a good thing for anyone. They are working for our overlords who want the real estate form themselves, Themember the workld Economic foum told us that in 2030 “you will own nothing and be happy”?
The worst that has ever happened to me was a strange guy, from north Africa, (to be fair I would heve =never expected it form him) I guess we all make mistakes. I had a room available inNottingham I wanted to rent and I did not seem to have great demand at the time, it wa Novemeber if I remeber well. I never vetted him, I met him in another HMO I own and he was a friend of one of the existing tenenats. He saud wanted to move to Nottighma, what a concidence I had a room available. I never carried out any die diligence on him and before he moved in we even had dinner togeteher. He paid the rent and deposit upfront like anyone else. I would not think it would have become a problem, to be fair anyone who met him at the beginning never thought he could have tried what he later tried and done.
HE paid rent no issue at all for the first few months. I had the first warning when ther ewas a leak above his room and water came down through the ceiling into his room. It was from the bathroom just above his room. While normally we just fix the issue he instead made a huge fuss about it to the pint that I told the manager at the time that I was happy to give all his overpaid rent payment and deposiut back if he wanted to move out quickly. He still wanted to stay. That was quite strange. It was strange because he seems to have made a huge deal out of this small issue which was resolved very quickly anyway, and yet he did not want to move. I did not think anything of it after that. He paid on time no issue and nobody made any complaint. From time to time I went to live in one of the available rooms and I met him and no issue. Yes he behaved a bit strangely but everyone does anyway in one way or another in my oipinion, nobody is the stereotype of perfection. He behaved consistently with the north afroican culture, so it was never an issue with me. It never sparked andy wporries. I even gave him some taks to do in the house, which he never did well anyway.
The issue stated in October the following year 2019 when he stopped paying his rent. He never told me about it he just stopped. When I asked he saud he lost his job but he would have paid me in a week. That week came and passed I aksed him hagain because he never got in touch with me. He said he was sorry but he reassured me that he would have paid me within a week. That week passed again and I had some roos for rent, I said to him “look, lets do it this way, your deposit has covered for the missing rent, how about you leave and this is it? ” He said”I dont have anywhere else to go, but I will pay…” then I replyed , look how about you do the viwings of the rooms and get a commission that is going towards the rent? ” HE retorded “of course no issue” . I gave him the leads and once he was in charge of the viwings we was responsive to my cals and whatsapp messages.
I sent him loads of leads from the ads I ran, but he never called them. Maybe he conducted a couple of viwing from the leads I gave him, but nothing came up in terms of tenants wanting the two rooms avalable at the time. All of the sudden he told me that he got two tennats. I asked hhim to give me thier contact before they moved in for contract purpooses, due diligigence and payment, and he said dont worry Ill do it soon. He nbever did. All of the sudden he said that one guy moved in and I said, I never received any rent, there is no contract. After I said that , quite concirned., he passed me on his number. Fortunately the guy in the room paid and signed the contract. I was slightly releived by it. Then he said that he was waiting for confirmation from the other guy renting the last room. I got quite suspicious because at a certin point he stopped answering my calls. I though somebody already moved into the room. So what I did I called another tennat and asked him to tell me if there was someone in the last room for rent. He said yes! I asked him during a video call, to knock on the room and pass me on to the guy living in the room. He did and I was furious, there was a guy I never met, never had contact details, let aloneany rent nor contract, NOTHING. I shouted at this new supposed tennant who he was and what was he doing squatting in the room, this during the video call. He did not know what to say and passed me on to the tenmnet I knew and the nice tenent I know said , “look I have not involvement in this” you have to speak to Ayub” . HE was embarrassed and did not want to be involved, he understoodd exacltly what went on. I was litterally fuming!
I called this Ayub guy back, I address him as this guy because I have very little respect for this kind of people. I said “Ayub there is a guy in the last room, I hoave not been told about it , I told you that I nneded to run my background checks and I have no contract and received any money, what is this?” He replied”Look I am sorry, I trusted the guy but by not paying he has really upset me and he will be out soon…” I had alreday enough of gis , I knew I made a mistake and I sked this Ayub guy to pass onn any house keys for the other rooms to someone else. Meanwhile I had received rent the the first guy (Call him JAmes) h emoved in, but even the problems with that guy staryted to appear quite shortly thereafter. The problem with James was that he was from north africa and he tought that he could rent a room and take 4 to 5 of his friends to live with him. I received a number of complaints about 20people using one of the bathrooms. I said beck to the complaint about 20 people using the bathroom :”look there is no 20 people in the house that it not possible” the complainining tenant said “well , it seems you minght not be aware of James…” I said ” What about James?” The enant said ” there are a lot of pople crammed up inn his room, did you not know?” At that point I told James this was not on and he said: “It is my right to have frineds… after all other people take their girlfirnds over too” It was not possible to reason with James, He just wanted his way. I told him look ” one thing is to have a girfrind over for one or two nights, but another is living ith 4 other males in the room and excpect that other poeple will tollerate it”
Pictures of clothes hanging to dry in the staircase. They used to dry their clothes on the handrail on the staircase. I received loads of complaints about it.
I told James to stop having people around and stop the colthes hanfging on th estaicase. Se agreed but guess what this carried on.
Meanwhile I had to work to get the new guy who Ayub just mved in Peter. HE begged me to stay and paid a little money in th eaccount, since he would not pay the full rent and he just was not liked in the house I had to work reletlessly to try to have him out in a peaceful way. I tell you it was a joke. I had Ayub not paying his rent, He move in two scubags woerse that he was. But despite all this I carried on to relosve the situation. I told Peter ” look you stayes here two weeks I will give you all your money back (very little ) but just go as soon adsn possble, I dont want you and nobidy wants you in the house”. Peter undesrstood he was not wanted , litterally nobodyt wanted him in the house, even Ayub turned against him and Ayub also turned against JAmes. It was a mess and all the other tenants felt in in the house.
Peter was the first of the three to move out. As soon as he was out I said, “one out” we still have Ayub and James to deal with. I tell you I have learned my lesson by that time. James at least was paying so he was my least concern. PEter was out in January 2020. Ayub said in January that he was just about to move out to London. So I left it alone for a couple of weeks Guess what, I was expecting someone to tell be Ayub moved out but in late January Ayub was still in. I had to go back to the house and I saw him again and I confronted him on th emissing rent and the factthat he was still there. I said ” Ayub what do we have to do? you have plenty of arrears, you told me you would have paid the rent months ago and you keep not paying and at the same time you stay. I call you you do not nswerr” By then he did not have the keyts to the the other rooms to do any viewings. When I said thta re retoirded” I will pay what I want, I will go when I want and there is nothing you can do about it because you need to evict me through the court, and this is very expensive” By the way he became very aggressivce and threatnening as he said it. Please bear in mind that I am very fit and strong so I had no fear I just looked and smiled in amusement. This was at the end of January 2020. By the beginning of February I had already decided to go to China. By the way on the 13th of February I was on an aircraft to China (I kew the pandemic was a scam). BEfore I left for china I confronted the elephant in the room with Ayub, I send him a very long message on the 8th of February.
Andreas: Dear Ayub
Final offer to settle this case, if you move out before the 15th of February we will forfeit every depth you have with us.
You are well over 2 months in arrears and your debt is mounting.
Now you have stated you moved out in the first week of January. Then to my surprise you were continuing living in the house and without paying rent. When I tried to call you on several occasions you avoided my calls and did not return any of my phone calls.
You have stated several times that you are moving to London and the move date is changing constantly while you keep staying in the house without paying any rent. You a week agioa stated you would have moved out in one or two weeks which means latest the 10th of Fe3bruarty. When I last met you a couple of days ago yopu now state that you maybe moving out ont he 28th of this month.
your arrears now amounts to over 620 Pounds and you refuse to pay. I have tried to find compromises in several occasions but you insist on not paying and still staying in the house.
This is my final offer to you to settle this case:
you move out before the 15th of February and I will forfeit every depth you have with us. You will owe us nothing provided that you move out within this time frame. If after the 15th you are still in the house our specialists will start eviction proceedings.
This means that
1 you will be evicted. For rent arrears for the sort you have this is an easy process for the professionals and it will be fairly speedy.
2 we will be able to obtain an enforceable court order to recover all rent arrears for the whole time you stayed in the house without paying rent. This means that we will be able to enforce payment even when you are out of the premises unless you file for bankruptcy.
3 court proceedings will leave a mark in your name afecting your ability to rent other premises and obtain credit.
There are also further repercussions which I suggest you seek legal advise about as you may not be aware of it.
All it is required to avoid all this is to kindly vacate your room before the 15th and I will forfeit all outstanding debts. However if you continue to occupy the premises without clearing all the arrears in full I have no choice other than passing on this case to the professionals.
Also note that the rent for the room you occupy increased to 360 pounds per month all bills included in March. So you would be liable for this rent in case we are forced to take this further and you still stay in the house.
[20:54, 2020年2月8日] Andreas: Once again if you move out before the 15th all debt is forfeited
[20:59, 2020年2月8日] Andreas: otherwise eviction will be enforced and our specialists will also enforce recovery of all debts. Once again we would like an amicable end to this by you moving out before the stated date. We hope you will take the best action in this case.
By the way before I sent this message I already had the lawyer ready for action. TYo my amazement he called me back immediately after and reassured me that he was moving out before the 15th. He actually did keep his word he moved out before the 15th. As soon as I was told that he handed his keys out I celebrated. I only has James to deal with and I knew it was easier.
What I think happened is that he realised I was going for it and it was not a joke now so he mored out volontarily.
I think my success with tennants is in very proactive communication, being able to fearlessly confront them and relentless negotiation, this is why the most I was ripped off was only 2 months rent. In March 2020 the retn moratorium started and it was not possible to evict anyone, I was very lucky to get read of Ayub before MArch, I am sure I would heve had to deal with him for another 12 months if he managted to stay. I am convinced Ayub did this before and he was trying his luck to live rent free as long as possible. I just said thattthe most I was ripped out of was 3 month’s rent, but in actuality I lst more over the years due to other factors. The most notable was when I did not check regularly the rent coming in and a tenant misses this rent for a few months and it cost me almost 2000 pounds, but this was only my fault.
After Ayub moved out, since JAmes continued to be the source of complaints due to the number of people living with him he moved out too he moved out easily. Basically this Ayub caused me grief, lost me monbey and moved scumbags in. Once the last cumbag (james) moved out I said to myself, Iwill make sure this waont happen again. And although it has passed less than 3 years from these events at the time of writing, I believe something similar may happen again but I will be able to recude the risks from hapening.
I believe when landlords are owed thoudands from their not paying tenents it is due to their
-bad vetting. What I tend to do now is to get stroing guarantors. I assure you that the tenets with guarantors never miss a payment. Of course the guarantors need to either have a UK home, or own a limited business that had been running for a few years. I would not reccomend to accept any person as guarantor. It happened in the past that one teneat would not pay and when I spoke to the guarantor the guarantor sis not want to pay either. Guess what the guarantor was the mother of the tenant and she was a renter. I still got rid of the tennat quickly ehough not to cause too much damage. This again was due to persisten negotiation.
-bad quality accommodation that can only be rented to scumbags, no decent people would live in them therefore if you want to rent a shithole you have to have scubags as customers. You get what you give.
-lack of cojones in confronting the tenants, please trust me when I say that when tenents try it on they always feel very uncomfortable about it. If they are confronted long enoigh and with enough negotiation they will move volontarily in 99 percent of the cases. Once again if you are persistant enoughthey will move without any need for court proceedings.m
-if you decide that court porcedengs do it fast though a lawyer without hesitation. Most scumbags leave either before of before they get their first letter.
How to gavoid bad tenents,
First line of defense is a guarantor. The guarantor needs to have somethign they can lose. This is very important.
So just the fact that you rent a roomm it takes away the hughe commitments to gad electricity , council tax Wifi Ect.
So why is it possible that an HMO is far cheaper than renting a flatg or house? This is due to economies of scale. Infact what happens is that HMOs are more and more viable asd you increase the number or riooms in a house. As you increase the nuimner of rooms in s abuilding , the council tax ermains the same, the heating consumption wifi consumtion remains pretty much equal
The maintwenence of one builer is cheaper than the maintennce of a number o f buiolders,
In essence fro the renter, a room is many times cheaper and many times more conveneent than renting any other type of accommodation. Additionnally if they have an ensuite the only facility they have to shgare is the kitchen and this is it nothing else.
This is an awsome protection. This ensures that only very smart and capable developers can convert buildings into legally viable HMOs. For staters you need a license, therefore if you operate a HMO without you could be prosecuted and face rent recuperation orders, fines etc. and please realise that it does not take much to becoem the target of a council prosecution, in theory it only takes a tennat who reports you to the council on its way out of his/her tenancy to trigger all hell loose oon you. In reality on the other habd porseciutions are not always guaranteeed to succeed and they are not used that often therefore no all landlords who run an illegal HMO get prosecurted. Usually the council prosecute only thos very small landlords who they feel will roll over and are difenseless under prosecution. Trust me the council officers are not that smart and not very knowlegeable themselves and they make a tion of mistakes and they know it themselves. I am not advocating for runnig any illegal HMO because it is not worth it in my opinion but it often very useful to know wht the reality really is. Whjt you see on the internet of successful proseutions anre the publicity that the councils do to their very sporadic prosectutions, because prosecutions are expensive afterall and risks for the council too should the council lose. Therefore for every psuccesful prosecution there is a ton of publicity spent on it. This publicity acts as a deterrent to many people, especially those who want to becoeme landlrds of HMOs.
At the bbeginning of my carree I looked at the HMO licence with diusdain and scorn. It was not fair to the market andf the general population, because it has always been very clear what this is meant for, which is make housing less affordable to the common person. The sysyem is rigged and do not forget it and it is a very good thing for you if you want to be part of this monopoly. After all it does not take much to become compliant, All it takes is compliance with fore regualtion, get the right amount of sockets in each room, comply with the space standards, install firedoors with autoclosers etc. I assure in prctice it is no much at all. But it is enough to deter may investors,
Dealing with the council officers a further deterrent.
The mother of my baby girl has seen the number of inspections my HMO in Nottingham is getting lately and she thought , should I bother making my house a licensed HMO? TGhe answer to her was and is a determined and definite YES! No doubt at all. After all these vists are harmeless but yes a waste of time indeed. However on the flip side you generally have a very good guaranteed cash machine wehic will produce almost no matter what. It is very funny what tghese useless counclil officers come up with in order to fault pick and often it it loudicrous. We also had a letter stating that we had to repaint the external part of a bay window as condition of the license. This requirement obviouly is completely made up.
The threat of the uncertaqtainly of dealing with the council and adhering to theese regulations is a deterrant to most amateurs. The beauty of these regulations is that once you know how they are enforced in reality then it is a relatevely easy game for you but it is enough to keep many other amateurs investors who could be your competition at bay. Rem,ember requaltions are never in place to maintain standards and public safety but on the contrary to protect and create monopolies in each regulated sector. Co mpliance with requil;ation does not mean quality or safety , it meansd you are in the club thaty is all. Therefore if you want to get in HMOS treat the regulation as Godsand from the protection of your ionvestmnt’s opint of view. Regulation is only there to protect your investment this is all.
The temr household.
The terms in the legislation is not person bu household. Tgherefore from a legal point of viw you can have 30 people living in an HMO but nothign can be done from a legal point of viw by the council (in theory) as long ans the total household are respected. Please note that in the terms of the license the council will place the maximum number of people in each room but his is a slightly different story. This legal trick is veryu importnt to understand because there are many things you can do with it as we will see later on. Basically you will see how you can ocnvert a 6 bed HMO into a 7 or 8 bed HMO without planning permission and this can be done legally. You will understand this once you understand how the plannign department really works, theirt real enforcement power and your lines of defense.
Article 4 and planning permission.
up to 2010 there was not any particular class for any HMO up to six people. All you needed was a licence and this was it. This wasx not very good for the our overlords. TIt was too easy for ordinary people to make HMOs out of norlmal house and make themselves a fortune and freak free from the chains of the 9 to 5 slavery system. This was certainly not good. Therefore our overlords alked to our puppets poliuticians and told them to introduce the new class C4 and this was the magic. Apparetly the licensing waas not enough, there was the need for further protection. After all it was far to easy to comply with the regualtion. The new class C4 allowed the conuncils to prohibit he change of use of single family homes (c3) into HMOs up to 6 households C4. HMO’s with more than 6 people or households remain unchanged and they required sui generis planning permission. Do not think that if you needed sui genereris planning permission and you applied for it the council would approve it, they will not approve it of course.
The planning departments and their tricks
The planning pepartment is one of the trickest and deceptive congregations there are. They lie and deceive very often. They always play the hide and seek game. This is not the same acreoss the board , theyre are some planning departemnts easier to engage than others. There are planning departments more hovnest than others, but generaly they are not people’;s friends, they can appear kind andf polite but they are ussually (not always) as deceptive as they can possibly be without getting into trouble. The reason for their lies and deception in my option is due to their sheer lack of real power. Especilly when it comes to change of use. The planning department , if they have any real power is in the demolition notices, and no much more. The problem they face, and do not ask me why is that in general the coucil has very little enforcement power in general. The most they can do is trying to enforce porsecutions and , prosecutions are expensive and you may easily lose the prosecuition case. Let;s say they threatne peo[ple or business with fines, do you know what happens if you do not pay the fine? Ofcourse it depends what kind of fine… most ofent than not nothing. YOu receive the fine, you ignore it they keep sending you a number of threatening letters, eventulaly pass it to a debt recovery agency and this is it. The debt recovery agency will sned you some theatening letters, but if you igone their letters long enough and block their numbes they will give up too. Guess what there is nothing that goes on your credit file, so your creedit rating remains unouched. I received a fine for 60 poubnd for driving on a bus lane and I did not pay it on purpose, I never appeal it nothign, just ignored everything, it has been over a year and I have not heard for months, I am quite sure the debt recovery agency has given up. Although I have not had any other type of similar fines issued by the council , I believe the council in reality has no real power other than criminal prosecutions. This is corroborated by the number of letters received over the years by council opfficers theatening actions, but if you dig into it the only action they have is court action, and this is not an easy route.
So due to their lack of real power the planning department seem generally incline not to inform the developers on the applicable legislation, and more often than not plainly mislead. They can do it in writing, without hesitation. After all it is hard to be fired ans a council officer. You really need to get into the office naked to have any chances of being fired, and if you are a woman council officer going in naked may get you even promoted.. whob knows. Jokes apart it is very hard to be fired as a council officer, you really need to resign, upset your superiors or doing something very agregious. On the other hand the planning department will lie but not too much… they will lie just enough.
The need from planning permission means simply it is legally practically impossible to turn a single family home into an HMO. This is simply because if you apply for planning permission the planning department will find millions of excuses not to grant permission, and there is little that you can do. I believe that if you keep trying long enough and you get the right frinds in the planning department you can get almost anything approived, but is it worth it, if you can focus your energies, nmoney and efforts in areas where there is no such need for planning permissions.
The separation between planning law and HMO licansinsg.
This is one of the best black hats tricks we have and it is absolutely beautiful if you learn the ad