HMO Liverpool advice please

by Readers Question

A month ago

HMO Liverpool advice please

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HMO Liverpool advice please

Dear All

16 months ago I bought a 6 bedroom HMO in Liverpool for 145k (105k interest only mortgage with Paragon, 5 year fix); I live in Somerset so it’s managed for me. I’m 54 and planning to retire in a couple of years.

Unfortunately, the expected tenants didn’t materialize, (or at least not enough of them) so I looked at another management company. The 2nd company tell me its location is good, as are the room sizes, but it’s in need of “doing up” i.e. new floors, new bathrooms, (only 2 at present ), new furniture new kitchen and decorated throughout – around 20k. I recently visited the property and noticed a couple of properties nearby which were boarded up, that wasn’t the case when I bought it.

I seem to have 4 choices:

A) Sell and loose maybe 40k- perhaps more.
Its my only property in my company so could sell it and the company together. At least it is a clean break with a city I probably shouldn’t have invested in, (I lack local knowledge). I’d stop worrying about it and focus on the successful properties in my small portfolio.

B) Rent to rent.
This would cover my mortgage but nothing else, worried that the person I lease it to may not look after the property, do the necessary smoke alarm checks etc, at worst case end up leasing to someone who ignores legal requirements and perhaps I end up in court!

C) Spend 20k-30k doing as the 2nd management company suggested, rooms would let out at £300 per month (maybe).
Might work but perhaps I could be putting good money after bad and end up selling at a bigger lose in a couple of years.

D) Invest 110k
A project manager has recommended I spend 110k upgrading the 6 bedrooms so that they are all on suite. I think it would probably rent out at £430 a room, however I don’t want to over extend myself and the profit is a little tight –total monthly costs £1,600, total projected income £2,580. In these figures I’ve assumed each room rents out 100% of the time! After re-mortgaging the total amount of my money in the project is £100k.

Any advice would be brilliant – I’m now having the odd sleepless night worrying about this property!

David

Comments

St. Jims

A month ago

If you go for option D), you risk being liable for Council Tax on every room, rather than just the whole property. It's an increasingly common tactic pulled by councils against HMOs - and it is triggered whne you make the rooms self-contained, even if they don't have a kitchenette.

If it were me, I'd do c).

Most rent to rent outfits are crooks, or happy to rent to crooks.

Ian Cullen

A month ago

Hey David,

If the property is in a poor condition, tired and not dressed this can effect voids.

Repainting, feature walls, new carpets, canvases and bedding are quite cheap. Kitchen & bathrooms are a little more spend but depends on the condition of your current house. LNPG offer discounts through their partners.

I'd be wary of spending out on ensuites. Two bathrooms done up is enough for 6 beds, although alot of people swear by ensuites and it can vary from area to area, I'd be careful of digging a bigger hole.

I know someone that's based around that area that might be able to help.

If you email me: iancullen121@gmail.com

All the best,
Ian

Robert Mellors

A month ago

The National HMO Network is having their annual conference in Liverpool in November. I would suggest that you attend this and make loads of contacts with other HMO landlords in that area, and you may get loads of useful information, and perhaps network with professional HMO landlords who may be looking at buying another property (perhaps yours).

Definitely don't add en-suites unless you want to risk getting multiple Council Tax bills.

Be aware that Councils hold the HMO landlord responsible for just about everything. I had a Council visit one of my HMOs and a tenant had left a duvet on the floor in the lounge, so the Council said that I had to go over there (20 miles away) and pick it up!!!! (as it is the landlord's legal responsibility to ensure that all the communal areas are clear and clean at all times). The HMO Management Regulations are a minefield, and put the onus on the landlord for the actions of the tenants, but the Protection from Eviction Act then makes it almost impossible to evict bad tenants quickly, so the landlord is legally responsible but has no legal power to do anything about it. - The law is an ass!

Mark Alexander

A month ago

Reply to the comment left by Robert Mellors at 15/09/2017 - 10:39
Hi Robert

Why on earth isn't this event advertised in our Events section? We could help them to promote it .... and it is FREE advertising for them.

Please let them know.

David Gorodi

A month ago

Reply to the comment left by Robert Mellors at 15/09/2017 - 10:39
Thank you Robert and St. Jims for the info regarding warning about council tax on each room -I had no idea! Very interesting to hear about the HMO network event too.

Anne Nixon

A month ago

Hi David
Is it possible that you might be wrong about taking a large loss so soon after buying your HMO?

Landlords are a helpful bunch generally and the wider you post about your predicament the more likely it is that you can get help. Property 118 is a great start and there are also some good landlord/property investor groups on Facebook, suss them out and then post about your problem there - there is usually someone local who is willing to advise.

I also have (student) HMOs in Liverpool, bought in 2006/7 which are fully managed but luckily I have had no problems with them - running and maintenance costs are pretty high but I never have voids.

If I were in your shoes I would be tempted to first minimise your loss as much as possible and then sell up there and draw a line under the saga - exactly what I am doing with a couple of mine (not the Liverpool ones).

IMHO your peace of mind and a good night's sleep is worth so much more than a few extra quid!

Yvonne Halliday

A month ago

Where in Liverpool is the property district and road I live in Liverpool and may be able to comment. Had lots of bad experiences with letting agents, 8 so far now manage myself but i have a friend who is a valuer with letting experience who may help you

Geoff Cunningham

A month ago

Hi David
Rent to Rent is not just for HMOs. I run a R2R Serviced Accommodation business in Liverpool and it is very much in my interest to look after my landlord's properties. If you would like me to look at yours my number is ** REMOVED BY MODERATOR ** - Please see "House Rules >>> https://www.property118.com/house-rules-business-sponsorship/

Annie Landlord

A month ago

Hi David,
it must be difficult owning property at a distance. I know there are good lettings agents out there, but my experiences with them haven't been good. Liverpool has some great areas for renting, some good student areas and sadly some really awful areas. If your HMO is in a very rundown area you are likely to attract low income and benefit tenants and you should plan for very regular maintenance and rent arrears. In that scenario there is no point in making significant or expensive upgrades. If, however, it is in a regeneration area the money could be well spent. As someone else has said, attending the HMO conference and getting the 'inside info' on your area of Liverpool is vital before you commit to spending thousands, or indeed consider selling. Lettings Agents have a vested interest as they want your money!

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