To HMO or Studio that is the question!

To HMO or Studio that is the question!

10:02 AM, 20th March 2015, About 9 years ago 2

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New member reporting in, I’ve been a landlord for 8 years now and I’ve got 4 flats and a couple houses. The last purchase I got planning to build new so doubled my money ( gogo permitted development rights 😀 ) so I’m now looking at my next purchase as I’ll have a good size lump sum. To HMO or Studio that is the question

I think I’m set on either a HMO or shared house (studio rooms). I think studio’s would be easier to rent and command better price for the same footprint. I don’t take DSS tenants at the moment but would look at it for a HMO. A letting agent takes care of the tenants, routine inspections etc. Touch wood not had a void in 8 years.

The demographic for the area is largely employed eastern euro’s, and we have LOTS of them.

Tentatively I’m looking at a £200k property that could be made into 7 studio’s (£20k refurb budget), each renting for £85 per week would produce circa £2,500pm rent, obviously less bills.

Would a lender then remortgage based on this rent rather than the purchase price ?

Appreciate any advice.



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Mark Alexander - Founder of Property118

10:04 AM, 20th March 2015, About 9 years ago

Looks like a question for a mortgage broker friends 🙂

Anne Nixon

22:26 PM, 23rd March 2015, About 9 years ago

Reply to the comment left by "Mark Alexander" at "20/03/2015 - 10:04":

Fred, this is an interesting question for me at the moment having just encountered a similar situation myself.

I bought a block of 12 flats in a newly converted building - lovely flats in a brilliant area and at £240k a great price I thought, as it was fully let with an annual income of around £50k.

HOWEVER, the valuer for my mortgage came back with a valuation of only £190k which when I completed left me with a LTV of around 59% and I was confused as to why this was - certainly not valued on the brilliant income, not the beautiful building on a great street?

Having asked around, it seems to be the consensus that it is because any risk to the building falls upon all the flats as they are all in the same building but it still doesn't seem to make commercial sense because as a high earning asset it would seem to be a 'no brainer' to lend against.

Very frustrating but nothing to be done about it I don't think.

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