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No experience, should I buy a HMO?

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Author Topic: No experience, should I buy a HMO?  (Read 106 times)
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« on: August 02, 2020, 09:43:01 PM »

Hi everyone, my mortgage advisor has suggested that I could buy a HMO to rent out, as a good way to save up a bigger deposit for buying my own house, and also to use the rental income to get a bigger mortgage. He has made this sound all very simple, but I have been doing a bit of research online, and am not sure that it's something I should be jumping into when I have no experience whatsoever in being a landlord. I would want to use a letting agent to fully manage the property so I don't have to do much myself. So my question to you is, am I absolutely crazy to consider this? It seems like there is a lot involved, and also a lot of costs such as the licence, utility bills, insurance, maintenance costs and the agent fees, as well as income tax. For example if I bought a 5 bed house (on a mortgage) would it be worth it financially and would that outweigh the work involved?
Thanks in advance for reading and offering any advice, which will be very gratefully received  :)
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« Reply #1 on: August 02, 2020, 10:09:48 PM »

I have been a landlord for over 20 years,and would run a mile from going into an HMO.I seriously question the advice you have been given,it all sounds wrong to me.This is no way to get a house of your own.
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« Reply #2 on: August 02, 2020, 10:12:57 PM »

thanks for replying, that's what I was thinking. It can't be that easy or everyone would be doing it!
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« Reply #3 on: August 03, 2020, 10:15:31 AM »

...my mortgage advisor has suggested that I could buy a HMO to rent out, as a good way to save up a bigger deposit for buying my own house...

This seems like spectacularly bad advice. So much so that I question is... are we sure there hasn't been a misunderstanding along the way?

A house is a house... is a HMO expected to be radically cheaper than a house you would choose to live in? Why a HMO? Why not just a rental? So many questions arise from this advice. If you can't buy a house for yourself to live in, how can you buy a HMO for others to live in? None of this makes much sense without more background.

I would focus on your own home first, as a priority, always. Then you play in the private rental sector, if you choose to. It's not for everyone and times are hard, and likely to get harder. Just last night I received an email that went... "As I believe you are aware I've been on furlough from my employers during the Pandemic, I went back into work for a few weeks however I was quickly placed back on the furlough scheme. This evening I have received an email saying I am being made redundant with immediate effect. Unfortunately as I was due to be paid on Friday 31st (didn't arrive) and now am being told the next payment I will receive will be the 28th August, this affects my ability to pay the rent due tomorrow in full. We've looked at what we have remaining and can transfer 375 tomorrow when rent falls due." - a HMO just multiplies those potential problems out, and then you have a millstone around your neck.

Or an albatross. Or a white elephant... or something.

If you can hack it, I would put all property plans on-hold... for a while... observe the market... especially PRS plans that might be germinating... you might yet benefit from a market fall (you may not, but there is a lot of uncertainty - more so than normal).
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« Reply #4 on: August 03, 2020, 10:19:19 AM »

Buying yourself a house - instead of a HMO - and then taking advantage of the Rent a Room scheme (if you can handle that) would be a more interesting way of dipping your toe into the water... plus, you can get a[nother] friend, possibly.
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« Reply #5 on: August 03, 2020, 10:40:02 AM »

Thanks for the replies. re. affordability, I live in an expensive area and don't want to move elsewhere, but it was suggested that I buy a house to rent out in a cheaper area. If I could buy myself a big enough house with a spare room to rent out I probably would, but I can't afford it.

Well I said I would find out a bit about it and decide whether it's worth thinking about, and now I have, I'm NOT going to consider it as an option! Thanks for all your help, it is very much appreciated  :)
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« Reply #6 on: August 03, 2020, 12:20:16 PM »

There's a (weak) argument in favour of doing that if you're in a rising market and don't want to get left behind but, even then, I wouldn't touch an HMO, especially if it's going to be some distance away. As it is, the market is flat in most areas and more likely to go down than up over the sort of timescale you're looking at. Find a wiser mortgage broker.
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