HMO Management

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HMO’s in Leeds

Leeds is what we call a ‘Tier 1 City’, a large multicultural city with two main hospitals, two fantastic universities, a premier league football team, an arena, multiple city centre and out of town shopping centres, a thriving business community, nearby airport, well connected railway station as well as being the home of a growing number of multi-national companies.

Leeds is a city where people of all ages want to live, study and work. As a result, Leeds has a thriving and buoyant HMO market and as a growing city the Leeds HMO market is seen by savvy property investors all over the world as a great long-term addition to any property portfolio. Historically seen as a student centric style of letting properties, the HMO model has exploded in the last twenty years creating a large professional and single room let market to compliment the traditional student lets. 

Nowadays many tenants, typically bridging the gap between their parents’ home and their own family home will chose to live in an HMO at some point, attracted by the lower cost of the accommodation. The properties are typically furnished with the bills included, an HMO can also be the perfect way for someone new to a city to kick start their social circle and start making new friends. 

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What is a HMO?

To use the technical term an HMO is a house of multiple occupancy, people use the word HMO sometimes to refer to a property that is rented room by room. To give it the official title, an HMO is a property let to more than 2 tenants, forming more than 1 household. You then have 2 classifications of HMO, unlicensed for up to 4 tenants and licensed for 5 or more.

An HMO will fall into one of the following categories;

Student HMO

Where a group of students rent on a single AST, typically they will rent for 12 months at a time and then move out.

Professional HMO

Where a group of professionals rent on a single AST, typically they will rent for a fixed period and then look to renew or go periodic, tenancy lengths are typically 6 or 12 months initially.

House Shares

Where the property is let on a per room basis to either professionals or students (it is advisable to avoid mixing the two as they have different lifestyles and requirements which could affect the harmony of the group). Each tenant signs a contract for their individual room and the bills are typically included in the rent.

From a planning perspective a normal dwelling house has a C3 classification, an HMO is a C4 classification, you can convert a C3 to a C4 under permitted development provided there are less than 7 occupiers and there is no article 4 direction in place.  

The article 4 direction means that the permitted development rights have been removed and a planning application is required. In Leeds the article 4 direction came into effect in February 2012 and covers the majority of the city.

For 7 or more occupiers the property would need a sui-generis planning application and C4 to C3 is still admissible under permitted development.

For lending it is important to be working with a competent broker that has good relationships with HMO specific lenders, a vanilla buy-to-let mortgage is not suitable for an HMO and for larger HMO’s it is possible to get a commercial product, Be weary though as lenders like to see experience before lending so a landlord buying an HMO as their first investment may restrict the availability of mortgages.

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HMO Management

From an investors point of view HMO’s are attractive because they offer yields in excess of what can be achieved with a single let property, if tenants are renting room by room you’re not left without an income in between tenants. However, with greater rewards come greater risks and HMO’s are not without challenges and need to be managed by a HMO management specialist.

The management of an HMO is a lot more intensive than a single let property and not only do you need to manage the fabric of the building but also the social cohesion of the property, it is not uncommon to spend more time dealing with tenant disputes than actual maintenance as well as factoring in the paying and management of the utilities.

Tenant turnover is higher for an HMO with tenants usually staying on average for about 18 months and the general wear and tear will be greater with higher traffic from both the tenants and their visitors. 

As well as the 300+ laws we have to understand as part of a single let, HMO’s also come with their own set of rules and regulations through ‘the management of houses in multiple occupation (England) regulations 2006. https://www.legislation.gov.uk/uksi/2006/372/contents/made

The Housing & Planning Act 2016 also introduced a range of measures to crack down on rogue landlords:

  • Civil penalties of up to £30,000 as an alternative to prosecution for certain specified offences
  • Extension of rent repayment orders to cover illegal eviction, breach of a banning order and certain other specified offences.
  • Database of rogue landlords and property agents who have been convicted of certain offences or received multiple civil penalties 
  • Banning orders for the most serious and prolific offenders 

Because of the extra work and risks involved with HMO’s most landlords and even Letting Agents avoid managing them altogether, it’s really important that if you’re buying an HMO as an Investment it’s managed by an agent that knows what they are doing and specialises in HMO management.

When recruiting your HMO managing agent, find out about the systems and processes they use in their business to let properties quickly, to minimise voids, deal with maintenance and processes the rents. 

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Planning, Licensing and compliance when setting up an HMO.

If you are thinking of buying an HMO in Leeds, the first thing you need to so is check to see if the property falls inside the article 4 area, if it does you would need a certificate of lawful use to show that on or before February 2012 the property was operated as an HMO and has been continually used this way ever since. If the property has not been an HMO before or the owner is unable to get a certificate of lawful use you will need to apply for a change of use from C3 to C4. Although this is a simple process, the council will look at a number of factors including the existence of HMO’s in the area before making a decision which takes 6-8 weeks.

If you are a landlord looking to let an existing property you will also need to make sure you have the correct C4 planning class in place. 

HMO’s designed for 5 or more occupiers will require a licence, a license cannot be denied provided the property meets all the councils current standards around fire safety and the amenity standards such as the sizes of the rooms and availability of communal space. HMO licenses cannot be transferred, if you purchase an HMO, you will need to apply for a new license. Just because a property you are buying now has an HMO license, it doesn’t mean the license will be granted to you if the amenity standards have recently changed.

All HMO’s require a fire risk assessment to be carried out which will make recommendations on the fire precautions but usually it would require emergency lighting and a fire alarm panel. As well as the usual gas and electric certs the fire alarm panel and emergency lighting will also need regularly testing.  

You will also need to provide a notice board and display key information in the communal areas, we find the entrance hallway the best place for this. 

All they don’t go through the rigorous scrutiny of a license application, a smaller non-licensed HMO still needs to meet certain criteria so it’s not just a simple case of taking a normal family house, sticking a bed in the living room and calling it an HMO. The legislation is ever changing so it is important to keep up to date to always stay compliant. 

More information can be found by contacting the Leeds council HMO team directly or by referring to the councils web-site.

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Make your HMO stand out from the crowd.

To really make the HMO model work you need to fully understand that an HMO is a different product to a single let and the experience is completely different.

To be competitive with a house share style HMO the bills will need to be included in the rent and will need to be controlled and monitored for fair usage. Overusing the gas can be a big problem in an HMO which is why we fit a Nest thermostat into all our refurbs so we can set and monitor the thermostat from the office. It is also advisable to have a cleaner visit at least twice a month to clean the communal areas and make sure the property is looking it’s best at all times.  

The HMO market in Leeds has become incredibly competitive and there is no shortage of choice for the potential tenants, make sure your property stands out by thinking about tasteful interior design and dressing the property and accessorising all rooms.

When it’s first launched the HMO should look like a show home and it’s important to get a full set off high quality photos graphs that can be used over and over again, it is strongly recommended to employ a professional photographer and creating a video tour and 3D walkthrough will attract more interest from potential tenants.  

We also recommend allowing 10% of your overall rental income to cover the cost of repairs and keeping the property in top condition. A tired and poorly maintained HMO can lead to a cycle of diminishing returns. 

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HMO management with Watts & Co

When working with Watts & Co to manage your HMO you can be sure that you are working with one of the best letting agents in the country. In the 2021 Best Estate Agent Guide we were listed as a highly recommended letting agency after an independent analysis that included a mystery shop. This isn’t something you can apply for and came as a nice surprise.

With our completely done for you management service we will look after everything from end to end:

  • On-boarding and setting up the HMO with the correct signage using our bespoke RAG system.
  • Premium Marketing with professional photos, 3D tour/Floorplan and Video walkthrough as standard
  • Showing the property to the widest audience using a combination of the portals, Spareroom, Social Media with a bespoke paid for advertising campaign for all properties.
  • Intuitive booking system with potential tenants able to be qualified and booked in the diary 24 hours a day using our fully automated system (ask for a demo)
  • Accompanied viewings by our experienced sales focused staff that don’t just open the front door but actually sell your property
  • Completely transparent online application system to keep you fully updated on all your applications from the comfort of your own home
  • Check in, inventory and diary management with a full compliance audit trail to tick all the boxes
  • Maintenance reported and managed through a tenant’s portal linked to our website
  • Unique and bespoke ticketing system created in-house to allow tenants/landlords to make general requests through the web-site
  • Free access to your landlord portal and online document folder to enable you to access all aspects of your tenancy 24/7 without ever having to call the office
  • Penny accurate rent reconciliation with click button rent chasing and arrears management.
  • Monthly communal inspection and fire alarm testing.
  • Dealing with notices, full check outs, turnaround and deposit handling

We also go above and beyond, helping our landlord and tenants with advice and guidance where requested, we are team of skilled, happy agents and run our business with the sole aim of being the best and having happy tenants that stay long term. 

We are quite selective with who we work with and will only work with landlords and investors that share our vision and values. If you have an HMO in Leeds and would like to speak to us about managing it for you, please book in a call so we can see if you would be a good fit. <Book Call>

 

HMO’s as an Investment

If you are interested in investing in HMO’s in Leeds we offer a full turn-key service and can become your own personal shopper.

Not only can we help find and negotiate the purchase of an HMO but also handle the construction side of things as well.

On your behalf we will: 

  • Look after all the planning, licensing and building regs requirements
  • Draw up a floorplan and schedule of works
  • Liaise with contractors to get quotes
  • Project manage and quality control the build
  • Design and source the design lead materials such as kitchens, fixtures fittings and sanatory wear.
  • Interior design, furnish and dress to get the property tenant ready
  • Snag and sign off the build. 

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Why Watts & Co?

No Hidden Fees

The price we quote is the price you will pay for selling your property with Watts & Co, with no hidden extra costs along the way.

Single Point of Contact

We will offer a personal agent service (one point of contact) for all your viewings, sales and offer enquiries.

Accompanied Viewings

We wont just open the door and stand to one side, we will commence fully accompanied viewings with agents who know about the property.

Property Open Days

We will accompany the buyers around the property whilst pointing out the features that are well loved by the current owners.

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Financial Advice

We work closely with companies that can provide you with mortgage and legal advice on buying or selling.

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Watts & Co

Office 8, Burley Hill Trading Estate, Burley Road, Leeds LS4 2PU

t: 0113 278 5555

e: info@watts-co.co.uk

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Watts & Co is the trading name of FDW Property Holdings Ltd, Registered in the UK Company reg number 10509376 at Office 8, Burley Hill Trading Estate, Burley Road, Leeds LS4 2PU. Watts & Co offer client money protection through CMP - Click here to view the certificate - we are also members of the Property Ombudsman redress scheme.