Changes to HMO regulations

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From the 1st of October 2018 mandatory HMO licensing in England is changing.

Here are the key points:

  • The three storey rule is being scrapped
  • Landlords who fall under the new regulations must apply for a license by October 1st
  • Minimum room sizes are being introduced

What this means…

Scrapping the three storey rule

The requirement for a property to have three storeys to need a license is being scrapped. That means any HMO occupied by 5 or more individuals (who aren’t all related) will need a licence. This occupation requirement isn’t changing.

Applying for a license

Landlords of HMOs that fall under the new definition must apply for a license (or temporary exemption) by the 1st of October 2018. If they don’t they’ll be committing a criminal offence.

The government originally announced there would be a grace period of sixth months but that isn’t happening now. All landlords affected must apply for a licence by the 1st of October 2018.

If your property is already licensed under mandatory or additional licensing then your existing licence applies until its expiry date. The new minimum room size requirements will apply from the renewal of your licence.

Minimum rooms sizes

From the 1st of October 2018, local housing authorities must also impose minimum
bedroom sizes for the HMO. Any room smaller than the specified size mustn’t be used as a bedroom.

The minimum bedroom sizes are:

  • 6.51 m2 for one person over 10 years of age
  • 10.22 m2 for two people over 10 years of age
  • 4.64 m2 for one child under the age of 10
  • Any area of the room with a ceiling height less than 1.5m can’t be counted
    towards the minimum room size.

It’s important to note these are statutory minimum sizes, not the optimal room size.

Local housing authorities must give landlords time to comply with the new room size standards. The maximum period they can specify is 18 months, but a local authority can choose to shorten this.

To get started with your HMO licence application follow this link.

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Referencing tenants – How far should you go?

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I received a text from one of our let only landlords earlier in the week asking what she needed to get to carry out a credit check on a potential HMO tenant. After requesting the information from the tenant (and of course consent) she received an awkward response;

“From what I know from my previous landlord knowledge, there is no legislation on credit checks for tenancies. With the new GDPR law there are limits on what data can and cannot be collected. Moreover, if I allow you to check my credit it can temporarily lower my score and it will always be on my record that you have checked it.”

If you were in her shoes and keen to get a tenant, would you skip the credit check or would you still insist one is carried out? What other checks, if any, do you do?

I advised our landlord to insist that it was part of her application procedure. What tenant’s don’t realise is that referencing and application procedure starts from the initial call, not just from when they want to move in. How they are on the phone, how responsive they are to calls, how prompt they are for an appointment etc. This all forms part of the overall picture you get for a tenant and affects your verdict to whether or not you would accept them as a tenant. A lot of landlords go on gut feel alone, but what happens when your gut turns out to be wrong?

Last week we had a tenant apply for one of our HMO rooms. Pleasant chap, fairly quiet and father as guarantor, perfect!. He is moving to Newark for work after graduating University so looking for a shared property. As part of our referencing process we carry out a credit check, work reference and previous landlord reference. All standard stuff and on this basis he would have passed with flying colours. But… we also request 3 months bank statements. The tenant was a little hesitant on providing these as he was in the process of moving accounts however we had to insist that this was part of our referencing process. They were provided and instantly we could see why he was a little hesitant. Despite not having an income he was a frequent gambler and depositing as much as £200 a day. Money was coming in from a relative along with benefits but was quickly disappearing. Gambling is fine in moderation. I have the odd flutter if I’m feeling lucky, or unlucky! However, to this excess indicated an addiction and has the potential to cause issues amongst other house mates. Without the bank statements we would have probably passed the tenant. He may have been absolutely fine but we aren’t willing to take that risk.

If a prospective tenant has a pet we’ll even go to their current property to see how it’s being kept. We find this is the best way to judge (see and smell) how they are going to look after your property.

Our referencing process is thorough and designed to keep away those that have something to hide. Our landlords provide great quality properties and it’s our job to ensure we have great quality tenants in them. Don’t cut corners when referencing as a bad tenant can cost a lot more than an empty property.

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Changes to HMO licensing announced

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Last week Heather Wheeler MP has laid regulations for the change to HMO licensing to be implemented in October 2018. You can read them here.

So after all this time, the net effect looks to be that from October landlords will need a licence if their HMO houses five or more people, forming two or more households – regardless of the number of storeys in the property.

It will also bring flats above or below commercial premises into the scope of licensing.

Interestingly, regulations regarding minimum room sizes, which were included in the succession of consultations, and other new mandatory conditions on waste are still to be passed.

As per the Government’s response to the consultation, it intends for the new requirements to be introduced in two phases.

There will be a 6 month grace period where licences will be required but enforcement action will not be taken. However, Section 75 of the Housing Act 2004 will remain in force meaning that any Section 21 notices issued will be invalid if the HMO is unlicensed.

Newark On Trent Property Market Statistics to December 17

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Following our last update at the end of June 2017 we wanted to share with you the changes to the market as we have seen it to the end of the year. Data has come from properties we have let, Land Registry and Home.co.uk. We’d love to know how your property compares so please leave any comments below.

(Figures in brackets are from the last update)

Average Monthly Rent In Newark

£599 (£578) – Let by Buttercross Estates
£542 (£568) – According to Home.co.uk

Average Monthly Rents By Type

£485 (£466) – Flats
£599 (£583) – Terrace
£624 (£629) – Semi Detached
£898 (£781) – Detached

Average Monthly Rents By Postcode District

£564 (£550) – NG24 1
£608 (£649) – NG24 2
£569 (£563) – NG24 3
£679 (£582) – NG24 4

Average Weekly HMO Room Rate

£86 (£85) – Standard
£120 (£116) – En-Suite

Average Time Taken to Move Tenant In from Instruction

20 Days (From properties taken on from another agency)

Average House Price By Type (Sold Price Data)

£104,251 (£104,890) – Flats (55 total)
£128,643 (£127,733) – Terrace (201 total)
£148,916 (£142,187) – Semi-Detached (229 total)
£233,749 (£222,511) – Detached (183 total)

Average Gross Yield By Type

5.58% (5.33%) – Flats
5.58% (5.47%) – Terrace
5.02% (5.31%) – Semi Detached
4.61% (4.21%) – Detached

Sales data has been released up to the start of October. Sales often slow on the run up to Christmas and we’ve seen that with the number of new properties coming to the market in the past month (just 27 in the past 14 days). It’s a good time to pick up a bargain as January will no doubt see a small surge in activity from both buyers and sellers.

If you would like a free review of your buy to let properties our door is always open. We can identify where your portfolio needs improving and how it can be done. With the changes to legislation and taxation landlords profits are being hit harder than ever so it is key you keep on top of your investments. Call today to book your slot 01636 343014.

Have a prosperous 2018.

Newark On Trent Property Market Statistics to July 17

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Following our last update at the end of 2016 we wanted to share with you the changes to the market as we have seen it to July. Data has come from properties we have let, Land Registry and Home.co.uk. We’d love to know how your property compares so please leave any comments below.

(Figures in brackets are from the last update)

Average Monthly Rent In Newark

£578 (£557) – Let by Buttercross Estates
£568 (£552) – According to Home.co.uk

Average Monthly Rents By Type

£466 (£447) – Flats
£583 (£540) – Terrace
£629 (£603) – Semi Detached
£781 (£782) – Detached

Average Monthly Rents By Postcode District

£550 (£565) – NG24 1
£649 (£613) – NG24 2
£563 (£512) – NG24 3
£582 (£578) – NG24 4

Average Weekly HMO Room Rate

£85 (£83) – Standard
£116 (£115) – En-Suite

Most Viewings Within 7 Days Of Listing

17 (For a detached 4 bed house in Balderton)

Average House Price By Type (Sold Price Data)

£104,890 (£109,059) – Flats (28 total)
£127,733 (£124,271) – Terrace (108 total)
£142,187 (£149,991) – Semi-Detached (121 total)
£222,511 (£221,525) – Detached (97 total)

Average Gross Yield By Type

5.33% (4.92%) – Flats
5.47% (5.21%) – Terrace
5.31% (4.82%) – Semi Detached
4.21% (4.24%) – Detached

Sales data has been released up to the start of June and after speaking with Andrew & Co solicitors last week they were stacked out on sales so I expect there was a flurry of completions before the holiday season. Although our ensuite HMO room rate hasn’t changed much, we’ve broken the ceiling and achieved £135pw.

If you would like a free review of your buy to let properties our door is always open. We can identify where your portfolio needs improving and how it can be done. With the changes to legislation and taxation landlords profits are being hit harder than ever so it is key you keep on top of your investments. Call today to book your slot 01636 343014.

Have a great holiday season.

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HMOs don’t work in Newark On Trent

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“HMOs don’t work in Newark On Trent” said a large franchise owner to a lady that is looking at buying her first investment property. This lady popped into the office for a chat about a small HMO (House of Multiple Occupation) that we sent out last week. I laughed when she told me what the other letting agency had told her as I had just (yesterday) filled the last room at a 5 bed property that will generate £30,420 in rent before running costs etc.

In the past two years the number of licensed HMOs in Newark has doubled but there are still only 25 or so in the area. Most of these are good quality which is pleasing to see and as competition rises these are the ones which should achieve the highest occupancy rates. Before you rush out and buy a big house and fill it with furniture there is a lot more to consider when deciding upon a HMO strategy. This is probably why other agents believe that “HMOs don’t work” because they haven’t been running them correctly.

Now don’t get me wrong there are no magic tricks or hidden secrets but it is about doing a good job and making sure you are catering for the market you are wanting to attract. Quite logical, don’t you think? I’m not going to share on here our strategy as other agents read this but I am more than happy to chat this through and give you my advice over a hot chocolate from Cafe Amore (and if you buy me one with the raspberry syrup I might just marry you).

PS. Hat’s off if you recognise the photo. The Young Ones was an 80’s TV show depicting life in a student flat (HMO).

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Student property, tenanted flat and a plot of land

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As most of you will know, we’ve been sourcing investment properties for a while now. We’ve got a few opportunities for a range of investments available from a tenanted modern flat, a student house let for the upcoming year and a plot of land with planning for a unique 3 bed detached house.

The first two investments are perfect for those investors who are looking for an instant return and don’t want any hassle. Both properties are being sold with tenants in place meaning no void period. The third is a plot of land that has not yet gone to the open market. Ideal for a self build opportunity or a builder after a development opportunity. The plans that have been passed look like being a very exciting project.

Full details are available via our Investor Club and you can register here.

Newark, NG24

4 Bed semi detached house let to students for 10 months of the year.

The Deal

Purchase Price – £170,000
Purchase Costs – £7,700
Refurb Costs – £0
Cash Required – £50,600
Monthly Rent – £1,150 (For 10 months of the year)
Gross Yield – 7.77%

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Newark, NG24

2 Bed ground floor leasehold apartment currently let.

The Deal

Purchase Price – £95,000
Purchase Costs – £4,550
Refurb Costs – £0
Cash Required – £28,300
Monthly Rent – £525
Gross Yield – 6.33%

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Lincolnshire, LN5

Plot of land with full planning for a very interesting 3 bed dwelling.

The Deal

GDV – £300-350,000
Purchase Price – £97,000
Purchase Costs – £4,610
Build Costs – TBC

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Want to invest but don’t know where to start?

Join our Investors Club and gain the tools to either start your property portfolio or expand it.

  • Priority alerts for off market opportunities
  • Special offers
  • Free 15-30 minute call/meeting to discuss your strategy
  • Access to our power team
  • Tips and advice to improve your yield
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Turning £100,000 into £15,000 pa

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Last week I had a call from a local landlord who’d been reviewing his property investment strategy. He was concerned that the upcoming changes to mortgage interest relief would affect him. After discussing his situation with his accountant they calculated he’d be better off giving up work and buying a couple of high yielding properties to replace his income (more free time with the same income… who wouldn’t!).

He phoned me to find out what what he could get with his money that would give him a good enough return. I ran the numbers on a couple of properties in Nottinghamshire that I know are coming to the market soon which produce pretty good returns…

Property 1 – Mixed Use Retail unit with Two Apartments

Purchase Price – £175,000
Cash Required – £55,300
Gross Monthly Income – £1,167
Nett Monthly Income – £504
Nett Annual Income – £6,048

Plus Points: Being a part commercial property this doesn’t attract the additional 3% stamp duty. The tenant in the retail unit has taken a 3 year lease rising £780 per year.

Property 2 – 5 Bedroom House of Multiple Occupation

Purchase Price – £125,000
Cash Required – £43,000
Gross Monthly Income – £1,100
Nett Monthly Income – £727
Nett Annual Income – £8,724

Plus Points: The tenant is an established company who’ve taken a long lease so no voids.

These figures above are based on getting a 70% mortgage on each property at 5% interest.

Combined, the two investments require £98,300 and produce a return of £14,772 after mortgage and management costs. This more than double the return you would get from a traditional buy to let property (such as a 2 or 3 bed house let to a family). Some people will be put off by terms like House of Multiple Occupation (HMO), mixed use and commercial but if you take the time to educate yourself you’ll see they aren’t so scary after all.

Returns like this can help you overcome the hurdles the Government are trying to impose on the private rented sector. If you want to find out about how your savings can work harder, or to clear those myths about non traditional investments I’d love to hear from you.

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Training for Property Professionals

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East Midlands Property Owners is a landlord accreditation raising the standards of the private rented sector. Here are details of the upcoming training events they are arranging.

In the fast changing world of the Private Rented Sector, professional training will keep you and your business one step ahead of the competition. Details of how to book can be found at the bottom.


Legal Update 2015 And Complete Possession Claims

Wed 05, Oct 2016, 09:30am – 04:30pm. (Nottingham)

This course covers the following:

Legal update part

• Housing & Planning Bill 2015/16 to include rogue letting agent / landlord database and abandonment

• Confirmation of the Deregulation Act changes and how they have worked in practice

• Immigration Act 2014 and the proposed amendments in the Immigration Bill

• Hidden Letting Agent Fees and an update on the Foxtons case

• Minimum EPC rating in 2018

• Supreme Court Decisions – McDonald v McDonald and Edwards v Kumarasamy

• Other current topics

Complete Possession claims online

• Get a greater knowledge of Possession Claims online

• Experience a demonstration of online form completion for both Possession Claim online (PCOL) and Accelerated Possession (APP)

£ 90 / Delegate For EMPO Members
£ 140 / Delegate For Non EMPO Members


Capital Gains Tax Course

Wed 12, Oct 2016, 06:30pm – 09:00pm. (Nottingham)

This half day course will help you understand and benefit from a deeper knowledge of Capital Gains tax (CGT). The course also includes how CGT is calculated with explanations of jargon and CGT allowances and reliefs that are available.

£ 50 / Delegate For EMPO Members
£ 75 / Delegate For Non EMPO Members


Inheritance Tax Course

Wed 09, Nov 2016, 06:30pm – 09:00pm. (Nottingham)

This half day course will help you understand and benefit from a deeper knowledge of Inheritance tax (IHT). This may be a significant potential tax costs for property owners being up to 40% of the market value of the portfolio.

£ 50 / Delegate For EMPO Members
£ 75 / Delegate For Non EMPO Members


Basic Law For Lettings

Thu 24, Nov 2016, 09:30am – 04:30pm. (Derby)

Covering the following:

• Pre-Tenancy

• The responsibilities and liabilities of the landlord / letting agent

• Setting up a tenancy

• During a tenancy

• Ending a tenancy

£ 90 / Delegate For EMPO Members
£ 140 / Delegate For Non EMPO Members


Understanding And Managing HMOs Including The Housing Act 2004

Tue 06, Dec 2016, 09:30am – 04:30pm. (Nottingham)

This course comprises of 2 parts

Understanding HMOs

• Licensing (Mandatory & Additional)

• HMO General information

• Management of HMO Regulations

• Amenity Standards

• Enforcement

• Register of licenses and Management Orders

• Regulatory Reform Fire Safety Order

This Course Also Includes The Following Additional Information: Housing Act 2004, HHSRS, Deposit Protection

£ 90 / Delegate For EMPO Members
£ 140 / Delegate For Non EMPO Members


Intermediate Law For Lettings

Fri 20, Jan 2017, 09:30am – 04:30pm. (Derby)

Covering the following

• Tenancy Agreements: Special clauses

• Correct dates for serving a section 21 notice

• Grounds for possession – overview

• Accelerated possession procedure

• Requirements for overseas landlords

• Considerations for instructing contractors

• Abandonment and surrender

• Deposit Protection Oddities

£ 90 / Delegate For EMPO Members
£ 140 / Delegate For Non EMPO Members


PAT Testing Course – Morning

Thu 02, Feb 2017, 09:30am – 12:45pm. (Nottingham)

3 hour PAT Testing course which will enable landlords to carry out their own PAT testing. The course which is broken into 5 Parts contains practical and theory sessions.

£ 50 / Delegate For EMPO Members
£ 75 / Delegate For Non EMPO Members


PAT Testing Course – Afternoon

Thu 02, Feb 2017, 02:00pm – 05:15pm. (Nottingham)

3 hour PAT Testing course which will enable landlords to carry out their own PAT testing. The course which is broken into 5 Parts contains practical and theory sessions.

£ 50 / Delegate For EMPO Members
£ 75 / Delegate For Non EMPO Members


Landlord Responsibility And Compliance On Fire Safety

Thu 02, Mar 2017, 09:30am – 12:45pm. (Nottingham)

This half day course looks at fire safety in HMOs and highlights the responsibility of landlords and the main pitfalls and hazards.

£ 50 / Delegate For EMPO Members
£ 75 / Delegate For Non EMPO Members

For details on how to book any of these courses visit the EMPO website here.

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Refurbish it and they will come

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In Kevin Costner’s 1989 movie, “Field Of Dreams” he’s standing in a corn field and hears a voice tell him “If you build it, he will come”. I’ve never seen the film but I’m guessing he was a landlord too.

I’m a big advocate of investing into your properties and refurbishing them. Think about it, if you’re house looks and smells like a sewer, who’s going to live there… rats! On the other hand, if you’ve got a lovely, high quality palace then you’d probably use the phrase “fit for a Queen”.

I see far too many shoddy properties coming to the letting market where landlords have failed to invest or improve the property. This reluctance to improve will end up producing a downward spiral of lower rent, worse tenants, poorer property, longer voids, lower rent, worse tenants etc.

Refurbish your homes to a good quality and good quality tenants will come. A good property will produce an upward spiral of lower voids, higher rent, better tenants, better property etc.

OK, so we know Kevin Costner wasn’t really a landlord, but the idea can be used across all parts of life. I’m a huge believer in the law of attraction and think it can be a very powerful tool in life and business. Those that know me will know that I am a believer in doing things to the best you can. We started Buttercross Estates with the mindset of providing the best service to both landlords and tenants as we can. We have built a company that delivered a high quality service and guess what? We attracted the high quality landlords and tenants. Those that shared our values and beliefs of being better. Better tenants and better landlords renting through a better system and service.

One simple example is of a 6 bed HMO that we let for a landlord. Below are a couple of photos of an en-suite room the previous agent was advertising at £85 per week.

Belvoir Room 6

Belvoir Room 6 again

After making a few suggestions to the landlord, he put down new carpets throughout, bought new beds and some bedding for the photos. The result was this…

Buttercross Estates Bed 6

We let this room for £110 per week just by turning it into a room you would actually want to live in. Overall, our suggestions and marketing made the landlord an additional £3,300 per year. He’ll also benefit from lower void periods and better quality tenants. He’s now going on to purchase another 4 bed house that we will convert into a high quality 5 bed boutique HMO in Newark.

Next time you’re letting a property just have a think about who it would appeal to. Or who you would want to appeal to. If you want a good tenant, refurbish it and they will come.

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