Why Supported Housing is a Game-Changer for HMO Landlords
The case for leasing HMO properties for supported housing has never been clearer.
Rene house, who manage high-quality housing for homeless people, only set up 6 years ago, has since doubled their workforce in the last 2 years. They tell me they are deluged with approaches from landlords and can now be ‘much more fussy’ about the quality of houses they take on. The Nottingham branch of the YMCA, send me regular requests for as many units as we can possibly send.
How many HMO properties are there being used for supported housing? The reality is, no one – including local councils – have a clear picture. Councils are now starting to track these numbers more closely, driven by increasing regulation in the rental sector.
So why is the industry embracing of this ‘niche’ strategy now? With the scrapping of section 21 evictions and higher mortgage rates, the appeal to the landlord is clear.
A lease with a supported accommodation provider means stable income, no chasing rent, no dealing with troublesome tenants, and no lengthy legal battles to evict.
For landlords with mortgages, void periods can be financially devastating; they cannot afford to have voids even though these are inherent to the nature of the rental market. Landlords seek predictable income streams to avoid the stress.
Student accommodation remains a stable and profitable strategy (albeit there is a full changeover every year it is predictable)……however the houses available for use as HMOs are limited by the Article 4 restrictions in the city, which are designed to protect mixed housing, and as such have a premium. HMOs have a classification of C4, and converting a family house or using a property with C3 planning classification to an HMO is not allowed under the restrictions.
Some Housing Associations who are Registered Providers can circumnavigate the restrictions by obtaining planning use class C3b (housing with care/support) for a property. There many houses on the market that have been used as an HMO so with quite an appropriate layout but that do not have correct C4 planning classification even if they have a license. Spot one and you might be able to sweep yourself a bargain and strike a deal with a supported accommodation provider.
A word of caution, get a mortgage broker who is really experienced in this area. As a general rule valuations will disappoint if you are using a BRRL model and you may find yourself subject to a ‘bricks and mortar valuation’ which might not work for you. Also, once you stray into accommodation where overnight care is needed, mortgage rates will be significantly higher. We’ll consider this next time.
Want to know about supported living read my next blog
If you have any questions especially if you are just getting started in the supported accommodation arena please don’t contact to contact me 07792 503 815
Whilst leasing property for any Supported Accommodation or Supported Living only a few years ago was a ‘niche strategy’, it now forms a major strand of landlord portfolio strategies. On the basis of landlord on-line network discussions, conferences, and specialist training courses, interest is very high and moving ever sharply upwards.
The ‘market’ for leased properties is highly granular. In this blog I will address Supported Accommodation for homeless single men in an HMO format, as this is the most straightforward ‘entry point’ for most landlords dipping their toe into the supported sector.
So what’s involved? Such arrangements typically agree a lease being signed for 5 to 15 years, and a housing association or other regulated provider (it could be a CIC – Community Interest Company) will usually cover all utilities, minor repairs, damages, ensure tenants are supported, and return the house in the state it was at the beginning of the lease; during this time the landlord will derive a fixed monthly income. Support for the tenants may be delegated to a charity or CIC or sometimes management and support are provided by the same organisation. The landlord would only by responsible for the external works like fixing the roof and replacing a boiler. There have been private landlords who have tried to offer support services without relevant qualifications to increase their profits, with the encouragement of some mainstream property training organisations, but action is being taken by the council to stop this from happening; to be fair some landlords are realising themselves they aren’t up to the job and never really understood what an onerous and skilled job supporting clients is.
Why did landlords dismiss this as an option? Many didn’t really know about it as an option to start with, or had preconceived ideas that their "house would get trashed" (unfortunately I’ve heard this many times). Supported accommodation of this type does bring lower monthly revenue than a premium HMO let to ‘young professionals’ or students. There has been a generational shift in expectations among students regarding university accommodation and they are very willing to pay for premium, (and they have solid parent guarantors to call upon).
The counter argument from supported providers has always been that you don’t have to manage or pay to have your property managed, you don’t pay for bills, repairs or suffer voids; it’s a certain return every month therefore the ultimate hands-off low risk property strategy. Good management means your house does not ‘get trashed’ and it’s in the contract you get it back in the state you let it. From a hard numbers perspective its regular profit that matters not revenue isn’t it? And peace of mind.
So why is the counter argument starting to cut through? What has tipped that balance?
Natasha McCracken
Why Supported Housing is a Game-Changer for HMO Landlords
The case for leasing HMO properties for supported housing has never been clearer.
Rene house, who manage high-quality housing for homeless people, only set up 6 years ago, has since doubled their workforce in the last 2 years. They tell me they are deluged with approaches from landlords and can now be ‘much more fussy’ about the quality of houses they take on. The Nottingham branch of the YMCA, send me regular requests for as many units as we can possibly send.
How many HMO properties are there being used for supported housing? The reality is, no one – including local councils – have a clear picture. Councils are now starting to track these numbers more closely, driven by increasing regulation in the rental sector.
So why is the industry embracing of this ‘niche’ strategy now? With the scrapping of section 21 evictions and higher mortgage rates, the appeal to the landlord is clear.
A lease with a supported accommodation provider means stable income, no chasing rent, no dealing with troublesome tenants, and no lengthy legal battles to evict.
For landlords with mortgages, void periods can be financially devastating; they cannot afford to have voids even though these are inherent to the nature of the rental market. Landlords seek predictable income streams to avoid the stress.
Student accommodation remains a stable and profitable strategy (albeit there is a full changeover every year it is predictable)……however the houses available for use as HMOs are limited by the Article 4 restrictions in the city, which are designed to protect mixed housing, and as such have a premium. HMOs have a classification of C4, and converting a family house or using a property with C3 planning classification to an HMO is not allowed under the restrictions.
Some Housing Associations who are Registered Providers can circumnavigate the restrictions by obtaining planning use class C3b (housing with care/support) for a property. There many houses on the market that have been used as an HMO so with quite an appropriate layout but that do not have correct C4 planning classification even if they have a license. Spot one and you might be able to sweep yourself a bargain and strike a deal with a supported accommodation provider.
A word of caution, get a mortgage broker who is really experienced in this area. As a general rule valuations will disappoint if you are using a BRRL model and you may find yourself subject to a ‘bricks and mortar valuation’ which might not work for you. Also, once you stray into accommodation where overnight care is needed, mortgage rates will be significantly higher. We’ll consider this next time.
Want to know about supported living read my next blog
If you have any questions especially if you are just getting started in the supported accommodation arena please don’t contact to contact me 07792 503 815
10 months ago | [YT] | 0
View 0 replies
Natasha McCracken
Whilst leasing property for any Supported Accommodation or Supported Living only a few years ago was a ‘niche strategy’, it now forms a major strand of landlord portfolio strategies. On the basis of landlord on-line network discussions, conferences, and specialist training courses, interest is very high and moving ever sharply upwards.
The ‘market’ for leased properties is highly granular. In this blog I will address Supported Accommodation for homeless single men in an HMO format, as this is the most straightforward ‘entry point’ for most landlords dipping their toe into the supported sector.
So what’s involved? Such arrangements typically agree a lease being signed for 5 to 15 years, and a housing association or other regulated provider (it could be a CIC – Community Interest Company) will usually cover all utilities, minor repairs, damages, ensure tenants are supported, and return the house in the state it was at the beginning of the lease; during this time the landlord will derive a fixed monthly income. Support for the tenants may be delegated to a charity or CIC or sometimes management and support are provided by the same organisation. The landlord would only by responsible for the external works like fixing the roof and replacing a boiler. There have been private landlords who have tried to offer support services without relevant qualifications to increase their profits, with the encouragement of some mainstream property training organisations, but action is being taken by the council to stop this from happening; to be fair some landlords are realising themselves they aren’t up to the job and never really understood what an onerous and skilled job supporting clients is.
Why did landlords dismiss this as an option? Many didn’t really know about it as an option to start with, or had preconceived ideas that their "house would get trashed" (unfortunately I’ve heard this many times). Supported accommodation of this type does bring lower monthly revenue than a premium HMO let to ‘young professionals’ or students. There has been a generational shift in expectations among students regarding university accommodation and they are very willing to pay for premium, (and they have solid parent guarantors to call upon).
The counter argument from supported providers has always been that you don’t have to manage or pay to have your property managed, you don’t pay for bills, repairs or suffer voids; it’s a certain return every month therefore the ultimate hands-off low risk property strategy. Good management means your house does not ‘get trashed’ and it’s in the contract you get it back in the state you let it. From a hard numbers perspective its regular profit that matters not revenue isn’t it? And peace of mind.
So why is the counter argument starting to cut through? What has tipped that balance?
11 months ago | [YT] | 0
View 0 replies