Until a few years ago, it was common practice to buy a residential house, do it up a bit and rent out the rooms to individual tenants – quite frequently students.
These houses were known as Houses in Multiple Occupation (HMOs) and were defined as “a property rented out by at least three people who are not from 1 ‘household’ (e.g . a family), but share facilities like the bathroom and kitchen.”
However, with the growing housing crisis, local authorities have been granted extra powers that allow them a far greater degree of housing control.
New planning permission requirements
In the past, all standard family homes had what were known as ‘permitted development rights’; these allowed a change of use to an HMO for 3-6 tenants without the need for planning permission.
But now many councils have chosen to remove these rights by means of an Article 4 direction; this means that new Buy-to-Let (BTL) owners have to apply for and receive planning permission to convert their properties.
They also have to obtain a licence to run an HMO.
An added expense
Assuming planning permission is granted, the licence’s cost varies from council to council.
We’ve seen basic fees of £400 – £610 per property, while some are calculated on the number of rooms.
They are typically valid for five years, after which an inspection will be necessary before renewal; some also require an annual renewal fee.
And woe betide the landlord who doesn’t have the correct licence; they could be subject to an unlimited fine and the refund to tenants of up to 12 month’s rent.
Be extra diligent when choosing your location
So, anybody considering a BTL property needs to be extra diligent in their research before purchase.
It’s no longer just a question of finding a suitably sized house in a convenient area; the postcode alone might be a major stumbling block.
Purpose Built Student Accommodation: bypassing the complications
This is why more and more landlords are looking to avoid these issues by exploring the very straightforward alternative offered by Purpose Built Student Accommodation (PBSA).
Owners of these student properties are spared all the headaches and responsibilities of BTL.
The units come with a fixed NET yield of 8-10% every year for 10 years and are run 24/7 by a professional onsite management team.
Quite apart from the routine maintenance and repair of the property, the team is also responsible for all vetting, letting and rent collection.
As an owner, you will have no legal, administrative or operational concerns whatsoever.
View our Student Properties