HMOs and The Impact of Licensing
This week I am going to share with you a potential trap you could fall into in your investments in Nottingham.
This trap concerns article 4 and additional licensing for a HMO.
I have found a 4-bed terrace house that could on first inspection seem an excellent HMO investment opportunity due to its price, size and potential.
Location
The property is located on Radford Boulevard, Radford, Nottingham, NG7 3BQ, which would be an ideal location for a HMO.
Cost
It is listed on Rightmove with Leaders for £170,000, an attractive price for a HMO investor.
Benefits of locality
Within 1 mile from Nottingham City Centre, where both of the city’s university main campuses are, the location would be appealing to students and professionals, making a HMO investment seem lucrative.
Licensing – the potential trap
However, the property falls within the HMO additional licensing area in Nottingham. This means that it is unlikely you will get planning permission to convert it, but if it already acts as a HMO and this can be evidenced, you may be on safe ground.
It is worth bearing in mind that the licensing and planning departments are separate within the local authority and have quite separate agendas. What one advises is not necessarily in line with the other.
An investor who is not aware of the licensing in place may see the potential of converting one of the large reception rooms into another bedroom, making it a 5-bed property to maximise their profits.
You may be looking at renting out each of the 5 rooms for around £100 per person per week if you were to let the property out for students. This would achieve £26,000 per annum, achieving a yield greater than 15%.
It is clear why an investor not aware of the article 4 argument, may go into this opportunity blind as it looks like a steal.
Alternative investments
Although the investor could still operate the property as a family dwelling, it would not be as lucrative as a HMO investment. A family let would generate an income of around £9,600 per annum, which is considerably less than you would achieve from a HMO.
There are of course other options you could venture into, such as title splitting, creating two separate titles or talking to people like me who have fingers in many pies and are able to create HMO’s at will.
Read the blog on Title Splitting
And look out for upcoming content collaboration with TitleSplit experts!
Useful links:
Check your property’s licensing: https://geoserver.nottinghamcity.gov.uk/myproperty/
