The Future of the HMO Sector: Being A Review of the Past Decade And A Forward-Looking Prediction for the next Decade

By Matthew Moody | HMOs

There is a serious problem in the United Kingdom which is not being addressed by governments either current or past.

Housing is at an all-time high due to inward pressure from a burgeoning population and external market forces from overseas demand.

In short: the housing market is at a tipping point.

It is the intent of the author through this white paper to illustrate trends that he has seen over the last decade and by using current statistics and predictions from industry bodies; paint a picture of what the future may be for our housing stock.

It will be focused on a niche sector of the private rental sector commonly known as a HMO being the sector within which Matthew Moodyl the author has been operating multiple businesses over the last 14 years.

Furthermore the author will make several recommendations as to how we could solve these issues going forward.

The rise in the private rental sector of HMO’s has come in part from several sources including restrictions to bank funding, the removal of sale and rent back, restrictions upon house class, growing student population, increasing transient working class and a booming training market.

 

2027 The HMO Sector

What we now need to consider is what the future of this sector looks like 10 years from now and create appropriate but actionable solutions to move forward.

With the future of the private rental sector in sheer jeopardy with the folly of recent and past government actions, one has to wonder; what does the future of the HMO sector look like for us?

In this blog post, we will review the following areas:

  • Housing Act 2004
  • Council Tax
  • Licencing

 

 

Housing Act 2004

Let us begin by reviewing this Act.

Despite the Stature being 13 years old; the foundations of the current approach to Housing is the same as it was back in the early part of the millennia.

Successive governments have tampered with the Act by introducing additional legislature and amendments, but no one Housing Minister has been brave enough to introduce a brand new act to cater for the growth in the private rental sector.

We now found ourselves with yet another ‘White Paper‘ and pseudo-fake consultation on the future of the sector.

What we need to review and contemplate is the very Act itself; what it is designed to do and where it needs to end up.

Given the recent Government concessions that the private rental sector will continue to grow and that we may be moving more towards the continental model; we do need to concede that the current Housing Act is obsolete and needs replacing quickly with a more modern and forward looking approach to the challenges we face.

As to the very nature of this and its contents, this is something that author will consider within the various elements that make up the Housing industry and what could or should be considered moving forward.

Our housing market has changed dramatically but unless the government takes on the task of reviewing and revising this Housing Act; we will end up in a situation where more and more people become homeless, regulations become over-burdensome and the supply of housing will become choked.

 

Council tax

Long the bone of many a home-owner and also a landlord, the very notion of council tax based on bandings from the 1990’s seems at first preposterous and at second, wildly out of tune with the times.

Needless be it for me to kick myself or my fellow landlords firmly in the foot but surely it would be better for the government to consider a legal-of-age ‘per person’ taxation rather than the rather quaint system currently enjoyed where it is entirely possible for a landlord to take a normal terrace property paying Band A or B council tax and transform this into a 5-7 bedroom property BUT still remain paying the same council tax.

Indeed it would almost be fairer if a person just paid a ‘housing or living’ tax as this is what it is no matter where they abode – and certainly for those transient tenants, this would actually raise MORE revenue for the government rather than less.

At the same time, we must also address the current ludicrous decision made by failing councils due to inept financial controls and out-of-control spending to tax a property investor who is refurbishing a home to improve the standard of rental stock or who is looking for a new tenant because the previous tenant left.

It seems unfair to me that a single person qualifies for a 25% reduction in council tax yet an empty property qualifies for no discount at all.

Yet again, landlords are being used as a scape-goat for an ever increasing and desperate government who have sold the family silver, gold and still wish to eat their cake whilst the cupboards are bare.

By moving to a per person ‘housing’ or ‘living’ tax, this would ensure that services are being paid for by the people using the services and move the responsibility from the property owner to the occupant to pay this tax.

 

 

Licensing

Law concept: computer keyboard with word Licensing, selected focus on enter button background, 3d render

The focus on licensing since 2004 has been nothing short of incredible.

Despite what the government would want you to believe; licensing has done little apart from tax the good landlords and allow the rogue landlords to carry on operating.

Whether the licensing scheme be mandatory or selective or additional, the rogue landlords will continue to proliferate and bring down the private rental sector because there are still too many of them, there are far too few council staff and most tellingly, the good landlords effectively continue to subsidise these bad landlords.

We are seeing councils implement ‘Selective‘ or ‘Additional‘ licensing schemes across the country in a desperate attempt to shore up bank balances and create a revenue stream despite the Government’s insistence that a licence fee should be a cost-neutral exercise.  We have seen departments of 8-12 people spring up overnight from new licensing schemes created leading us to ask the question; if this is cost neutral why are so many new employees needed to run the scheme and secondly if there is a serious attempt to crack down on rogue landlords; why is there not a Rogue Landlord squad on each council – similar to a Fraud Squad or similar who investigate financial crimes.

We are also seeing no consistency in approach led by councils on the licensing of properties which leads to uncertainty in the market and certainly will inconvenience the institutional investors the government are so fond of.

It is necessary to have a licensing regime but at the same time, I believe that the scheme should be national in nature; centralised training should be provided at government level on ‘interpretation’ of the licensing scheme and that more help and assistance be given to the good landlords who are trying to comply in order to improve the housing stock.

 

 

So let us know what your opinion is regarding the future of HMOs! 

Leave a comment below and share your thoughts with us!

Crackdown on Rogue Landlords – Again?

By Matthew Moody | HMOs

room_hmo

A new minimum bedroom size and the extension of licensing to thousands more properties are to form part of a government crackdown on rogue landlords who cram tenants into overcrowded homes. As rents have risen in recent years some landlords have attempted to maximise profits by squeezing tenants into rabbit-hutch properties. Family homes have been divided into bedsits, with some landlords letting spaces that are just three metres squared, or advertising rooms that are shared with other tenants.

 

There have been rumblings since the original measures of the act came into force in 2007 that the HMO definition needed to be revised to make it all encompassing and not just the three storey, five people, two household rules for mandatory licensing. The strict definition of an HMO has been the point of conjecture amongst both enforcement agents and the landlord fraternity, and in some cases the legal definition has been challenged to the full extent of the law.

Even now, I have to correct, albeit as diplomatically as I can, some beliefs around the definition of an HMO and in some cases, these are people who should know the difference between an HMO and a property that needs a mandatory license. Too often HMO is a term used to describe ‘a licensable property’ and the confusion to a certain extent can be firmly laid at the door of the councils of England and Wales. In some cases I have dealt with on behalf of landlords in the East Midlands, I have needed to re-educate Council Officials on the difference between an HMO requiring a mandatory license, and a property that is an HMO but only requires planning permission to comply.

On top of that, bedroom sizes, have become a sticking point. Again in some cases, it could be argued that the ‘size’ of a bedroom has been used to restrict the occupancy of a property under a license as a way of the council controlling the proliferation of multi-let properties under their jurisdiction. A guideline or directive from central Government does not have to be followed by a local council as it is not a legal requirement,. Hence councils have been allowed to implement their own guidelines on room size. Legislating will remove this ambiguity and create a level playing field for all property owners.

I do, however, have one niggling and recurring thought to all of this; Will additional or refining existing legislation really curb the appetite of the ‘Rogue’ landlord? or, as is the case to date, will it just push up the costs associated with renting a property. whether that be landlord or tenant costs?

Does the Private Rented Sector (PRS) need any more regulation?

What are your thoughts? Have you seen the impact, good or bad, of the current legislative regime on your housing stock?

How to Market Your Business for FREE – An Idiot’s guide to Online Marketing

By Matthew Moody | Business Mastery

Let’s talk about leverage;

In the property world, investment in property works where the money you invest (or not) is geared to generate a higher level of return. In the case of property the ‘tool’ is a mortgage.

If you borrow money at a lower rate than you can get Return on Investment (ROI), then you are, by definition, gearing your money. In some cases that gearing or leverage can be infinite (that’s not for this article go to our blog for the ways to do this).

So how do you leverage your online marketing, and more importantly, get it done for free?

Please note that I did not say it wouldn’t cost anything, I said it was free.

As with anything in life, there is a trade off, in this case it is time.

So how can you leverage both?

Enter Social Media. Now don’t switch off, this is a catch all for everything that we do online in an interactive way. I have lost count of the amount of times I have had to explain the difference between Sales and Marketing. Marketing is the journey from a want to a desire, and Sales is the conversion from desire to action.

Lecture over; Online marketing is therefore a journey and unless you have the ‘silver bullet’ a lot of what you do online is trial and error.

So how do you ensure you are using the right tools?

My advice is in two parts:-

  1. Choose Your Battleground

For smaller businesses (SME) it may not be appropriate to use all of the channels at once and in spreading yourself thinly across multiple platforms you could be damaging your brand. One esteemed colleague of mine made it very clear on one of his talks to a local business group when he stated’ “It is nice to be on all of the Social Media Networks, but if you don’t socialise with your network you can do some real damage. It is better to NOT be on a channel, than be on it and be silent.”

The important thing to understand is that your Social Media presence is your window to the virtual world. It is worth investing time in posting, tweeting etc so that the world can see what you do.

Social media means a SME can have the same impact in terms of marketing, as a large multinational, but without the large overhead cost if it is done correctly.

The only tip here is that SME should concentrate on TWO or a maximum of three channels, otherwise they will be spending all day on marketing on nothing on delivery. Unless you have the budget to hire an in-house specialist, but even then it would be prudent to be selective with the channels you pick.

  1. Be in the room!

The other thing to consider is only use the channel where the majority of your clients ‘hang out’. Some networks have a specific demographic and unless your clients fit within that demographic then you will find it difficult to gain any traction. According to Hootsuite, Instagram have a younger user base (53% aged 18 to 29) so if your target market is over 60 then this channel is not for you.

There is a chain of thought that a B2B company would do better with utilising LinkedIn, whereas B2C would do better using Facebook and Twitter. This sounds okay, but individual businesses would need to do their own customer avatar research before taking this as any form of guidance.

We have prepared out Top ‘5 Top Tools for Marketing your Business’ which you can download, that we use on a daily basis. They all have FREE versions which we use, and all of them allow us to leverage our time (and obviously money) to great effect.

If you need any help with configuring them or want to know how we use them, then drop us a line!

Remember all the tools are FREE, and we all like that, don’t we?

A Perfect Elevator Pitch – Have You Got One?

By Matthew Moody | Business Mastery

elevator-1598431_1920Whether you are trying to raise money for your business or just want to perfect your business strategy, a solid elevator pitch is an essential tool for achieving your goals. An elevator pitch can be delivered either verbally, ideally in 60 seconds or less, or as a one-page overview of your business. Think of the elevator pitch as an executive summary that provides a quick overview of your business and details why you are going to be successful.

 

The original concept of an elevator pitch, unsurprisingly, came from our cousins across the pond and according to Wikipedia is credited to  Ilene Rosenzweig and Michael Caruso of Vanity Fair Magazine and refers to the time you have got to pitch an idea to someone, if you were ‘stuck’ in an elevator with a potential investor travelling between two floors in a building. Originally a ‘thirty second’ monologue, it has been used to describe any ‘pitch’ to a potential investor where time is of the essence. It is more commonly used at networking events as a way of introducing you and your business to other people in the room.

So it goes something like this;

“Hello Dragons, my name is John Smith, and I am here today to ask for £10,000 in exchange for 10% equity in my company – Do As You Want”.

Sometimes you peak interest, sometimes you don’t. So exactly what should you be saying, and more importantly what should you NOT be saying.

In Dragon’s Den, budding entrepreneurs come face to face with (now) five well known (?) business owners that are considered established in the ways of business strategy and growth. The SEVEN things that make a good elevator pitch are listed as;-

  1. Problem – Identify a problem that needs solving and why?
  2. Solution – How will you solve the problem?
  3. Target Market – Who will buy?
  4. Competition – Do you have any?
  5. Team – Who is on your side already?
  6. Financial Summary – How much and when?
  7. Milestones – Ambition?

This seems a lot to squeeze into what will possibly be just SIXTY SECONDS, but this is a proven way of condensing your message.

In reality, the whole thing can be intimidating, but if you get it right, the end result is people talking to you about your business. You have ‘earned the right’ to your next ‘exposure’.

There are a few things I would like to add to the list above, as more of a ‘don’t list’;

  1. Alienate – do not criticise anyone in your pitch
  2. Distract – use a real life example of success
  3. Fantasise – realistic achievable figures only please
  4. Make it up as you go along – be prepared – see later
  5. Waffle – keep on track
  6. Dress Up – be presentable (unless you are pitching fancy dress)

Always be prepared. Most networking events have some kind of ‘elevator pitch’ and it is important to have TWO or THREE pre-prepared scripts that you have rehearsed over and over again in front of the mirror so that they become second nature.

Why?

Because you don’t want to be the one in the room that stumbles, reads from a scribbled note, or looks as white as a sheet. I have seen some awful pitches (why would anyone put themselves through it?) and I have witnessed some excellent ones. Take note all of you network leaders out there, whilst you may think it is funny, or a challenge; springing an ‘elevator pitch’ on someone when they have not prepared for it, you will not see that person again for a while. Make sure everyone at your event knows what is expected of them. You are a leader, communicate.

Being prepared (or the 5 P’s as I like to call them; Prior Preparation Prevents Piss Poor Performance) gives you confidence, and don’t worry if you don’t get it all in the first time, keep trying, keep adjusting, try it on the dog, your spouse, your children, or anyone else that will listen. It gets easier, I promise.

For some more great tips on ‘How To Survive Dragon’s Den’, go to our exclusive Four Video Giveaway on the topic

See full story on bplans.com

Small is beautiful – But also Expensive if you are in London!

By Matthew Moody | Easy Street

Edinburgh has a slim offering in the form of a converted 19th-century coach house, eight feet four inches wide at its tightest point, with living space (excluding garage) under 10 feet at its widest. Sliding doors and windows from the living and dining areas lead straight on to a walled courtyard garden, which is a good space for parties. Viv Douglas, who has recently inherited the house, says her parents took the idea of downsizing quite literally when they bought the house around 30 years ago for their retirement.

 

Another unusual sale of property in London in the last few days is a garage that is on sale for £500,000. The best bit is that it is leasehold with ‘only’ 92 years left on the lease! Click here for more details. There are many other examples of small living and possibly the best one I have seen to date is the Polish Architect, Jacob Szczeny’s approach to small living. It is so thin that the entrance is a trapdoor in the floor! Click here for more detail. Entertaining could be an issue, but when it featured in a TV documentary the architect happily showed how you could have several people in the property at the same time.

So the question I always ask is, How small will it get before it is uninhabitable, or just plain unrealistic.

At YourHMOExpert we specialise in conversions that get the most out of the space in a property. For more information please contact us and get our free ebook by filling in the form on this page.

Image courtesy of telegraph.co.uk

Moving Overseas and becoming a UK landlord – Important Things You need to know

By Matthew Moody | Ask Matthew

 

As you will be out of the country, I recommend using a managing agent. They will source and assess tenants, checking affordability and employment status. Meet a few local agents and obtain appraisals of your property to see what each can offer.

There are three key things you need to know. One, how do they deal with repairs, using an in-house team or subcontractors, and how bad does a problem have to be before they need to consult you? Two, how do they deal with out-of-hours emergencies? Three, do they guarantee rent even if the property is vacant? Some agents will include Rent Guarantee Insurance (RGI) free of charge for a desirable property. And, of course, ask what charges all this will incur.

It is important to note that since 2007 it has been a requirement to have an ‘Agent’ in the UK if you are not living here. In this case ‘Agent’ does not necessarily mean your high street letting agent, it can be a nominated individual, usually a relative, that has the authority to act on your behalf in your absence. A lot of people moving abroad, even for a short while, do not appoint an Agent and fall foul of this when the local authorities (LA) come knocking. Luckily most LAs will give chance to remedy this before acting in an official capacity.

You will also need to register with the Tax Office to have you rent paid without deduction of tax while you are away. Again a lot of Agents (including those on the high street) are oblivious to this, and can result in a big headache for you if you do not get this done before you leave. It normally takes about three weeks to get this done (it used to be called FICO registration), and nowadays it can be done online free of charge (click here for the government pages), so make sure you plan this into your schedule before you leave.

For more information and help on how to get an HMO done the right way, please complete the form.

Photo courtesy of Pixabay

Bucket List

My Bucket List – What’s on Yours?

By Matthew Moody | Ask Matthew

One of the few films that I have yet to watch is ‘The Bucket List’ starring Jack Nicholson and Morgan Freeman, and whilst any film with either of these acting heavyweights is sure to be a ‘must see’, I am told that the comical element is about as good as it gets.

When I first heard of the expression ‘My Bucket List’, I had visions of a Room 101 spin off that allowed you to dump anything that was surplus to requirements without the repercussions of dealing with your other half after having disposed of something that you dislike, but they have loved for years. But it turns out I was wrong; a ‘Bucket List’, is a string of things that you (or I) detail as a wish list to undertake before you ‘kick the bucket’.

Most people, since the film, presumably have undertaken this task with vigour, and I have seen lists that extend to pages, and have hundreds of items on it. My list is short and I have restricted it to under 100. That’s not to say I won’t add to it at some point, but in order to begin ticking off the list, you have to take action to actually get them done.

One of the ‘high’ level items on my list is to ‘Write a book’. Now this isn’t any ordinary book, and I have penned some property educational tombs (you can view them here , but this one is going to be different. It needs to be educational as well as factual, real life, nitty gritty, warts and all, you get the picture.

In order to get the best from the narrative I am wanting to produce, I have researched several areas of interest and spent hours scouring shops and internet on the best processes to achieve the end result.

I have found an excellent resource that actually teaches you how to write a book and gives you access to free tools to help you. The best bit is the course is FREE as well, courtesy of our friends at www.YouWillChangeTheWorld.com. Click here to get straight to the online course.

Here’s to your success, and ticking something of our Bucket List.

Let me know how you get on, or drop me a line if you need inspiration!

News - What News

Why You Shouldn’t Believe Everything You Read in the Press!

By Matthew Moody | Ask Matthew

Isn’t it just typical – when you start your day, you open up your email (or Facebook or LinkedIn profiles) to see the latest tit-bits of information that will help you with topics for discussion with your networking later in the week and you see one article headline that tickles your interest, only to find another article further down your list that appears to contradict the first one!

Today was just such a day for me. What makes this particularly interesting is that they both use the same statistic to explain the headline;

Here’s the first one …

Just scan for the Rightmove data. And then the second article;

Here’s the second one …

Both articles quote a 0.9% drop in asking prices in the UK for July from Rightmove data, but one article states the ‘Market’ is ‘robust’ while the other blames ‘referendum uncertainty’ as the cause for the drop. The latter article then goes on to say that the drop is ‘within usual expectations’ for the time of year.

My point is that the ‘Media’ will make headlines whatever underlying statistic is used. Everyone can look at a piece of information and argue one way or another based on their own values and belief systems.

Can they both be right? Well, Yes ….. and No.

As one famous philosopher said, “Whether you think you can or you think you cannot; you are right”.

Sometimes, ‘lazy journalism’ has a lot to answer for. A drop in house prices of 0.9% isn’t significant in statistical analysis, it isn’t even a ‘blip’, but the media still want to make a story. By the very nature of that statistic, ‘average’ is not the same for wherever you choose to do your due diligence. The area you choose will be driven by local factors, not national averages. By definition, there is a positive for every negative where an average is used.

The trick is to find the positive, and leverage it to your advantage. Do some homework, don’t be led by the media, and get your power team in place, and start your journey.

For our own views on the Property Outlook this year, you might want to read our article

Pokemon

Why Is Pokémon Go like buying an HMO?

By Matthew Moody | Ask Matthew

For those that are not aware of the latest hot app in the market, Pokémon Go is dubbed an ‘augmented reality’ app due to its video capture overlay technology. Nintendo, the owner of the original handheld game phenomenon, have teamed up with a third party software developer to produce the latest craze.

It has been such a hit that the NSPCC have written a series of guidelines for parents whose children have downloaded the game – click here to get them

So what is all the fuss about, and how can this possibly relate to Houses of Multiple Occupation (HMO)?

When Pokémon, the game, originally came out on the NintendoDS, it was aimed at children, and appealed to the same children that wanted to collect all the Figurini Panini Football Stickers to fill their albums, the idea being to go around and capture all different kind of Pokémon while travelling through worlds of discovery. This all happened within the confines of the on screen world.

Pokémon Go, is a resurgence of the original idea, but uses your GPS enabled device to show you where the Pokémon are so that you can go out and about and catch them. The really cool bit is that you can take photos of where you catch them, and trust me, they appear in all kinds of unusual places! This is the addictive bit, trying to catch the Pokémon when they appear.

And that’s the thing with HMOs, catching them when they appear. Sometimes, even when you undertake hours of research on search engines, property portals etc. you can never find any that seem to stack up, and then a ‘friend’ suggests a property just two streets away that is up for sale and you completely missed it. Some people call this ‘analysis paralysis’, others in Yorkshire say ‘can’t see t wood for t trees’.

Just like Pokémon Go, even though they appear to be visible, underneath they just aren’t there.

So how do you find the deals to get on with?

There are several tricks to finding the right deals, some are more basic than others; sending leaflets to all houses in a certain area where an HMO would see high rental demand, schmoozing estate agents to make sure they contact you first, employing a professional sourcer. The important thing to remember is that sometimes, like Pokémon Go you may need to try an alternative to the normal route to get what you are looking for. Jumping over a fence to catch a Pokémon in someone’s garden possibly isn’t the way to get to the next level, but then if sourcing an HMO was easy everyone would be doing it…..

Perhaps there’s an idea for a new app, the Pokémon HMO sourcer?

Or perhaps you need a few new ideas; our 5 ways to source an HMO is an excellent place to start.

Whatever your challenge, there is always help at hand. How do you source your HMOs?

Let me know.

Tax is not Taxing

Tax – What Tax?

By Matthew Moody | Ask Matthew

You know how sometimes you can read between the lines and see the bigger picture?

Last week, George Osbourne, in an interview with the Financial Times made a definitive statement concerning Corporation Tax in the next few years. In it, he stated that he would reduce the level of tax to ‘below 15%’, meaning it would be the lowest rate amongst full EU members.

You have to ask, Why make a statement like this now?

In March this year, he claimed he would reduce corporation tax to 17% by 2020, and although this takes it one step further, no timescale was given.

So is this wishful thinking? After all, between now and 2020, there will be at least one general election, and in the current climate, no-one can say who will form the Government of the day. We may even be looking at another ‘Hybrid’ coalition.

So what can we read into this?

Someone quite famously said, ‘I want Landlords to squeal’ or something along those lines when introducing the current raft of income tax changes that affect landlords charging rent in the Private Rented Sector (PRS), and it has to be said that ‘Institutional’ investment into residential leases is not affected by these changes, so is this another way to ‘legitimise’ individual property portfolio building?

A recent Inland Revenue ruling stated that a landlord collecting rent on holiday lets would be deemed a business and should attract the same taxation treatment as a business in allowing expenses for any direct cost item to be taken off the bottom line. So is ‘he’ trying to force landlords to hold property in a structured way, via LLP or Ltd company?

The latest statement would seem to make this strategy more attractive. Essentially a 25% reduction in taxation would be good, although I would suggest that this will be done in a staggered way to avoid a big hole in the finances.

Suggestions are that he has made the statement in the wake of uncertainty in the market for business in general in the UK, to try and make the UK somehow more attractive to the outside world, and appease the big institutions who believe leaving the European Union will damage their ability to compete. Is that a bad thing?

In theory, now that we can look forward to setting our own limits on taxation, VAT, etc and by Mr Osbourne flexing his muscles, despite being a staunch ‘remain’ advocate, we should be pleased they are looking forward.

Or is he trying to make his job safe?

You decide.

If you need any help with how to maximise your income and minimise your tax burden, help is at hand – Just pick up the phone or get one of my free downloads