{"id":2314,"date":"2017-02-07T10:29:57","date_gmt":"2017-02-07T10:29:57","guid":{"rendered":"https:\/\/www.citylets.co.uk\/blog\/?p=2314"},"modified":"2022-12-20T15:07:19","modified_gmt":"2022-12-20T15:07:19","slug":"hmo-conversions-new-strategy-to-achieve-higher-yields","status":"publish","type":"post","link":"https:\/\/www.citylets.co.uk\/blog\/hmo-conversions-new-strategy-to-achieve-higher-yields\/","title":{"rendered":"HMO Conversions – New Strategy to Achieve Higher Yields"},"content":{"rendered":"

It is about to become, quite literally, a ‘taxing’ time for landlords when the new tax changes for landlords are introduced from this April. Astute landlords who have considered the implications of the full effect in 2020 have already started to take steps to help alleviate the impact of the new cuts to tax relief.<\/p>\n

Some have converted to Limited Companies, others have sold their properties or intend to raise rents to help compensate and some have started to adopt another approach entirely.<\/p>\n

Extra rooms equate to extra rental income<\/strong><\/h4>\n

Roma Finance, who specialise in financing bridging lending saw a significant rise in landlords borrowing for House in Multiple Occupation (HMO) conversions in 2016. These landlords have converted their one or two bedroom properties to three, four and even five bedrooms by renovating extra spaces such as attics, garages and living rooms. Extra rooms obviously equate to additional rental income, helping to ease the financial effects of Osborne’s 2015 summer budget<\/a>.<\/p>\n

\"\"<\/a><\/p>\n

Clearly there will be significant borrowing costs involved in these conversions, however, as Roma Finance’s managing director, Scott Marshall explained: “One landlord we worked with calculated that in one of their properties they could rent out five rooms, vastly increasing income and yield, for just a \u00a330,000 conversion cost. The increased rental income would cover the cost of the loan over twelve months. In this case it made a lot of sense to carry out the conversion.”<\/p>\n

Gregor Fortune, owner of Edinburgh based Residential Property Solutions has also observed a recent change in activity with HMO properties: \u201cOver the last 6 months I’ve noticed more and more investors coming from overseas, Aberdeen and existing landlords looking to increase their portfolio. Knowing that the demand for good quality HMO properties in Edinburgh is so strong, my first approach is to guide them down the path of converting an appropriate property into an HMO.\u201d<\/p>\n

Students often prefer to rent with a group of friends<\/strong><\/h4>\n

HMO\u2019s are popular in cities with a high student<\/a> population as groups of friends often prefer to rent a flat together. Therefore each individual contributes to the rent, rather than a family or a couple paying the rent as a whole.<\/p>\n

\"latest-apps\"<\/a><\/p>\n

Gregor Fortune explained: \u201cOne of the main attractions of converting your property into an HMO and aiming for the student market is that if you present the property well, you are able to charge far higher rents than renting to a family, and most commonly you can secure a 12 month tenancy resulting in 100% occupancy and no fear of void periods during the winter.\u201d<\/p>\n

It appears that the labour of managing extra rooms and paying for additional licensing costs throughout the rental of the property is deemed worth it for the extra yield that can be achieved.<\/p>\n

Therefore, an HMO conversion could be an alternative for landlords who would prefer not to sell but are concerned about yields after the tax changes are introduced.<\/p>\n","protected":false},"excerpt":{"rendered":"

It is about to become, quite literally, a ‘taxing’ time for landlords when the new tax changes for landlords are introduced from this April. Astute landlords who have considered the implications of the full effect in 2020 have already started to take steps to help alleviate the impact of the new cuts to tax relief. …<\/p>\n","protected":false},"author":1,"featured_media":7271,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":true,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[197,1],"tags":[233,232,127],"class_list":["post-2314","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-being-a-landlord","category-property","tag-buy-to-let-properties","tag-hmo-conversions","tag-landlords","being-a-landlord","property"],"yoast_head":"\r\nHMO Conversions - 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