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CS Lets HMO Management

HMO Conversions - Don't Fall Into The Traps

Are you thinking of converting your house to a HMO, or have you already purchased with the intention of doing so?


In this post we'll give you a free 3 step HMO appraisal guide to help make those important decisions!


1. Local Area

  • Restrictions - Check the local council for any restrictions they have in place for HMO conversion, e.g. Article 4 restricting Permitted Development (PD) for conversion from C3 to C4.

  • Connectivity - Where are the nearest transport links? Can tenants easily commute to the nearest towns or key locations? Is it walking distance from the nearest train station, for example?

  • Supply and Demand - Ensure that there are tenants and enough demand to fill your new accommodation in the area, and at the budget range you're looking to target. To get a rough idea you can look at the Rooms Wanted section of popular listing sites.


2. Cost Analysis

  • Purchase - Is the asking price in line with recently or currently listed properties on the same road or within a short distance? How much is the stamp duty? What's your financing method and how much is the cost of finance? What are your legal/brokerage fees? To speak to a broker, click here for our recommended firms*.

  • Refurbishment - Is the property just in need of HMO compliance works in terms of fire and electrical safety? Or does it extend to reconfiguration and cosmetic work? Does it need furnishing? Is there potential to increase number of bedrooms in accordance with the local council's HMO standards, or increase the total internal floor area? Use our quick scale below as a rough guide depending on what you're looking to achieve, pending assessment by your team or contractor:

    • Compliance works and licencing only: £3,000 - £5,000

    • Reconfiguration, compliance and cosmetic: £10,000 to £15,000

    • Complete overhaul including all of the above (back to brick, 5 or 6 ensuite installations): £60,000 - £70,000

    • All of the above plus rear extension or loft conversion: £90,000 to £110,000.

Of course, all of these figures will depend on the location, build team used and the specifics of the property itself, but they are representative figures based on experience with hundreds of projects.

  • Running Costs - How much is the council tax, water, gas, electricity, internet, and any mortgage costs? An allowance for certificate renewals and small maintenance of around £50 per month.


3. Achievable Income and Return on Investment

  • Rental Rates - How much can a single/double/ensuite room achieve on the current market? Are there any indicators that this could change (for better or worse) in the near future? Always use conservative figures.

  • Return On Investment - When you total the achievable rent and calculate your total income minus expenditure, what percentage return does this represent? Above 10% net return on money invested is considered a good return for a HMO.


If you'd like us to check your property for you, we'll be happy to advise in an initial evaluation. We also offer full consultations with site visits. Get hold of us on 0333 577 8123 or email info@cslets.co.uk. www.cslets.co.uk


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