Creating New Zones from Existing Homes

HMO is a term used to describe accommodation that is owned by a private landlord/Investor and shared among a number of people (Tenants). The acronym stands for a House in Multiple Occupation.
There are a range of different types of accommodation that could fall under this definition, depending on how many people are living there and what the living arrangements are. As a rule, where there are three or more tenants in a property who make up more than one household with shared toilet, bathroom or kitchen facilities, this could be classed as an HMO.   

Typical property arrangements are: 

• A number of bedsits in one building 
• A hostel 
• Halls of residence (private) 
• A shared house 
• A block of converted flats 
• Individual shared self contained cluster flats. 

Whether your property is classed as an HMO usually depends on the number of ‘households,’ which is either members of the same family who are living together or a single person.  

Demand for flexible, affordable housing is increasing exponentially. There is a trend in the UK (especially in cities and larger towns) where the average size of a typical ‘household’ is declining. At the same time, the overall population is increasing. This combination is leading to increased demand (in the right areas) for HMOs over and above single-room rentals. 

Rental yields can be as much as three times higher than standard Buy-to-let and there are less (impactful) rental void periods. When one tenant moves out, you still have other rooms tenanted. With a single let, a void period will mean an empty property. 

There is less exposure to arrears/risk. With multiple tenants, you are less exposed if a tenant falls behind on their rent as there are still other tenants that are still paying. In a single let, arrears can mean the entire loss of income on a property. 

Given the purchase structure of an HMO through a Special Purchase Vehicle (SPV), there can be tax advantages to investing as more of your costs will be tax-deductible.  

The possibility of converting property from standard accommodation to an HMO is available to everyone. If you have the will, finance, contacts and time, its possible to undertake one or many projects.  

For those that have funds to invest and wish to see a short and long-term return through the strength of bricks and mortar, without the hassle of dealing with contractors, tenants and all of the administration associated with a project of this size, HomeZones provide a turnkey solution. 

There is also complex legislation associated with the purchase and management of an HMO, HomeZones has significant experience in this area and removes the responsibility for our Clients. 

For clarity, HomeZones is not a building contractor, our role is to introduce various third parties and manage the administration on behalf of the client. All payments and commercial relationships are held directly between the client and relevant third party.

Ownership of the property remains with the Client from the outset to final handover of keys. HomeZones will source an appropriate property based on our experience and present to the Client. 

Once agreement is reached to proceed, HomeZones will initiate the processes required to manage the project through the various stages. Mortgage/Finance, all building and utility contractors, local authority HMO departments and Accountants for the SPV (Special Purchase Vehicles).  

Our Project Managers have extensive experience in selecting the relevant properties based on:  

• Target price, to ensure compliance with the HomeZones financial model  
• Proximity to Town/City centre 
• Commuting distance to City 
• Property Floor plan, to ensure the ultimate layout can be achieved 
• HMO coverage in that particular location to ensure non-saturation  

We are currently focusing our efforts on the Home Counties as there is significant demand and low-cost properties, prevalant to HMO conversion, are still in plentiful supply. HomeZones is a UK wide business and will expand geographically at an organic rate or at our Clients’ specific request. 

There are many towns and cities in the UK which lend themselves perfectly for HMO and are relatively untapped. Our strategy is to target areas where large businesses operate sizeable campus areas or manufacturing plants with high levels of low-income, blue collar workers.