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Article > Why Do So Many Letting Agents Steer Clear Of HMOs?


Article kindly supplied by Sally Lawson

The word on the town is...HMO (House of Multiple Occupancy) properties are the lucrative way to, not only make your property deals stack up, but give you very high yields, compared to standard lets. However, HMO management is always a challenge, even at the best of times, so for anyone deciding to enter this perceived cash cow area of property lettings is very tempting.

Some landlords enter into the world of property investment with the idea of instructing a local agent to manage their HMO investment for them, but then when they try to place their instruction with an agent they're surprised to find that most letting agents won't touch HMO's with a barge pole! No agent appears to want to let HMO`s. Why is this?

Firstly, the Housing Act 2004 makes it quite clear that if you are managing a property, on behalf of a landlord, then you are classed, in law, as being the legal 'Property Manager' which means you must be fit to do so. Therefore, in order to be deemed fit to manage HMO's, the Agent has to attend the appropriate training courses to be able to manage licensable properties. Although the training is not onerous, it is not something that many 'Property Managers' will automatically do, unless the letting of HMO`s is the mainstay of their business.

So, if HMO's are so lucrative... why don't letting agents manage HMO`s?

"Here's a Few Key Reasons Why!"

One of the major problems with many HMO properties, currently out there in the market, is that they are simply non-compliant. They have not been converted with any regard to regulations, and in many cases, if they have been converted, they've only been partially converted, and not adequately enough to be officially fully compliant.

This can be a real headache for property managers, putting them in a very difficult situation. As, within law, they can become liable to prosecution and serious fines due to properties not being fully compliant. So, only someone that really understands the HMO regulations, inside and out, can undertake their own compliance checks to ensure everything is all present and correct. It's only with this experience and expertise that they can be confident about taking on the management of HMO properties.

Another key reason why many Letting Agents refuse to manage HMO properties is the "Hassle" factor. Many agents feel that a lot of people living in one property would be "Hassle" and in some poorly managed or poorly maintained properties, this could very well be the case.

If you have a lot of people leaving under one roof, then naturally additional gripes and issues can occur, as the more personalities involved, the more pressure or chances of friction being created. With regards to your standard lets, when a typical family rents a property, there is usually a natural hierarchy of authority, with the head of the family resolving disputes or lubricating the process of finding a consensus of opinion together. But when there is no natural authority figure, then the property manager has to keep stepping in to fulfil that role.

A further key point is the fact that many agents will shy away from this because the rents for each room are generally quite low, and the return for agents are low. Also the fact that the typical demographic of tenants in low quality HMO`s can usually be the deprived or low income level, leading to the Agent's impression that this will create even more hassle to contend with.

So, to sum up, with the promise of low returns, awkward tenants, and high responsibility, most agents just don't want to know!

"You Know, It Can Be Done!"

As a Letting and Property Management Agency, if you have appropriately trained staff on board to manage and monitor your HMO properties, with solid systems and processes, specifically for the management of HMO properties, for example, checking the fire alarms, cleaning the communal areas, gardens management, parking, bills management and inter tenant disputes, then you're happy to take on instructions for HMO's.

One of the keys to HMO success is to have a very good selection process for the type of tenant you allow in to the property. This will certainly prevent, or dramatically reduce, any potential hassle. This is coupled with a specifically designed fee structure for the management of HMO properties.

If an agent has the systems, processes, and training in place, to be able to manage HMO`s, they can be an extremely lucrative business for any agent.

Sally Lawson CEO of Concentric Lettings


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About the Author

Sally is both a Lettings business owner and a UK Letting Business Professional, who has over two decades of owning and running Lawsons Letting Agents.

About Concentric Lettings
Concentric Lettings is a National Multi-Branch Lettings Agency, set-up to forge a presence right across the UK. Each branch is run and operated based on the highly successful Lawsons Lettings Agency in Wolverhampton, West Midlands which has successfully been market leader in their area for over 20 years.



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