After news stories a few months back have tagged HMO investing as a lucrative way to make money, people have gone bananas over HMOs.
The basic plan for every HMO property investment is this: buy a house or a large building; renovate or convert that property capable of housing multiple tenants; find tenants; and manage it yourself or let a lettings agent do it.
There are some people who made a fortune out of this 4-step process, but I’ve also talked to a couple of people struggling to make it big with this formula. These sources of mine claim that their struggle with HMO property stems from the fact that some letting agents are refusing to manage HMOs!
At first, I was really confused as to why there seemed to be quite a high rate of refusal from lettings agents. So I went around and interviewed a few HMO property agents I’ve worked with for the past years, and the reasons I discovered don’t all boil down to money.
Firstly, the National Housing Act of 2004 requires people managing a property of their own or for other people (aka property managers) to go through several training courses before they can manage registered HMO properties.
Hence, their lack of compliance with these legal requirements and prior certification may be preventing some lettings agents to manage HMO properties, despite their skill or interest to do this.
Secondly, many HMO properties out there are simply non-compliant with the specifications laid out by law. Meaning, these houses have been converted without taking into consideration the proper measurements and facilities dictated by law, or like in many, many cases, these houses were converted with partial compliance only, leaving other parts of the house not up to par with standard requirements.
This anomaly is a big headache for property managers or lettings agents, since according to the law they can be held liable for fines, and, even worse, face prosecution for these non-complied HMO property requirements.
If they want to evade these penalties, then these lettings agents must check personally if the properties they are managing really meet the standard. No wonder lettings agents, who don’t have a good knowledge base of laws and regulation directed towards HMOs, are hesitant to take on these properties. It’s better to be safe than sorry is their motto, I guess.
Thirdly, lettings agents think that managing a house with multiple occupants, at the same time, are a hassle to deal with.
Think about it: if one tenant has an average of 2 requests per week and there are 5 tenants in the same house making the same number of requests but referring to different things, it’s going to take a lot of patience and time to solve these requests. Unfortunately, not all agents are willing to suffer through this hassle whatever the cost.
Aside from that, there is also high probability of conflict in houses with different personalities living in it, and being a mediator between quarrelling tenants is not part of their job description, as many letting agents would argue.