BTL HMO enquiry

Stapletonb

Just want some opinions of what you think. I believe this to be a good investment as long as there is tenants for most of the year.
I am looking at a BTL HMO property.
Property price £225,000
6 bed terraced house
2 bathrooms and 1 bedroom with shower
It currently returns £32,400.
Tennant already in place.

I would be paying the utility bills which include, broadband, electricity,! gas, council tax which is no more than £350 a month.

With stamp duty and solicitors fees, it would reach £10,054

Deposit £70,000
Mortgage 3.6% over 25 years
Fees £150
Monthly mortgage £785.75
Broker fee £998
On completion! £250 cashback

I would initially pay someone 12% of the monthly income to manage the property, as I have not dealt wilt HMO before. I'm aiming to manage the property after a year.

I believe that is everything.

Thanks in advance.

00ec25

HMO licence renewal fee cost & frequency?

it may well be an existing HMO, but does it meet the relevant fire and other safety requirements?

Pixie5740

That's a pretty good return although I imagine that HMO have quite a high turnover of tenants so that means more juicy fees for the letting agent.

Have you sourced a mortgage yet because HMO are excluded from many lenders BTL mortgages and require commercial lending?

anselld

Stapletonb wrote: »

I would initially pay someone 12% of the monthly income to manage the property, as I have not dealt wilt HMO before. I'm aiming to manage the property after a year.

12% is expensive for fully managed and it does not absolve you of any of your responsibilities as a Landlord. You will not necessarily learn best or even good practice via a letting agent.

You would be making a big commitment so if you are serious then do you research up front and manage yourself from day 1.

AdrianC

6 bed HMO, tenant (singular) in place?


If that's so, then why? Is that tenant somebody that dominates the property and puts others off sharing?

macman

'Tennant already in place'?
It seems then, after Dr Who and Broadchurch fame, he's fallen upon hard times if he now has to live in an HMO...
Do your costings take into account a) the initial capital cost of renovations and furnishings to make the building suitable for letting? b) the ongoing cost of maintenance, renovation and replacement of items as tenants come and go (in a 6 b/r HMO , I'd expect quite a high rate of turnover.)
Utilities: you forgot water. Also, giving 6 tenants an 'all you can eat' deal for gas, electricity, and water (not to mention broadband), is an aspect that could really come back to bite you on the backside. Are you sure you've really done your budgets for this?

mchale

Stapletonb wrote: »

I would be paying the utility bills which include, broadband, electricity,! gas, council tax which is no more than £350 a month.

Are you sure on those figures.

Stapletonb

Thanks for you replies. Hope this answers all questions.

HMO licence is £635 for 5 years but is not yet required, although I believe I will require this in the near future with rules of HMO changing.

Yes I have sourced a mortgage through a broker due to being quite difficult with HMO.

Sorry for confusing message, there is currently 5 x professional tenants in place. The property will come with all furniture included.

Health and safety is all up to date, gas certificate, electrical, fire and smoke alarms. Only one concern was that they have converted the house to 6 bedroom leaving no living room, only a kitchen diner.

I believe water will be included in the utility bills as well. The current landlord has something in place that says if the bills go over £350 a month then the tenants pay the remaining.

The property is in good order all round apart from the garden could do with a tidy up.

Thrugelmir

Stapletonb wrote: »

Mortgage 3.6% over 25 years

Somewhat unlikely. Budget on a rising interest rate.

Stapletonb

Mortgage is a 2 year fix at 3.6%

AdrianC

Stapletonb wrote: »

Mortgage is a 2 year fix at 3.6%

And after that?


That is incredibly good for a BtL mortgage, though.