Explained: London Build-to-Rent, Shared Accommodation, & HMO

Build-to-rent? Shared accommodation? HMO? RentLondonFlat’s offerings? All explained.

Build-to-rent is a relatively new concept, but already growing massively in popularity among home owners and renters a like. Build to rent properties are generally large-scale apartment blocks built by commercial developers and investors that offer one or two bedroom apartment for rent. Larger Build-to-Rent schemes will often be owned and managed by a specialist BTR operator who offers a range of facilities on site that the renters can access – from social spaces, to gyms and concierge services.

Build-to-rent properties offer a variety of benefits over other types of rental accommodation such as shared accommodation and HMOs (Houses in Multiple Occupation). Here are some of the main points to consider about build-to-rent properties, shared accommodation and HMOs.

What is Shared Accommodation, and how does it work?

 

Shared Accommodation

Shared Accommodation refers to when tenants share common areas in the house. Each renter generally has their own bedroom and shares other spaces such as the living area, kitchen, and sometimes bathroom. This type of arrangement is often found in houses, but can also be found in flats, apartments and even BTR properties. While you are able to have your own space in shared housing, renters should not expect the same level of privacy as they would if renting a self-contained apartment. Shared housing is often favored by students or young professionals who are seeking cheap accommodation close to their university or workplace.

Types of Shared Accommodation

Flat/house share

The most popular kind of share is one in which a flat or house is leased by a group of sharers under a joint tenancy agreement (AST). Every tenant in the share is responsible for paying the rent and complying with the terms of the contract.

Let’s assume there is a male and a female flatmate that want to leave after the lease. In a joint tenancy, their notice effectively terminates the tenancy for everyone, so you’re not sure if you’ll get a new contract and roommate. But don’t worry – most landlords are fine with allowing you to find someone to replace you and sign

Renting a room from a landlord

Are you thinking about renting a room from your landlord? You’ll have a separate agreement with them, which is ideal because you’re not responsible for any other tenants in the property. The main drawback is that it’s most likely your landlord who will choose new tenants if one of you leaves, and they may exclude existing flatmates from the search if they feel it’s not necessary.

Renting a room from a live-in landlord

This is pretty much how it sounds: you are a lodger if your landlord (and perhaps their family) lives in the property with you. If the boiler breaks, for example, they’ll want it fixed just as quickly as you do, so your house may be a higher standard. Rent might also be less expensive; however, because they may not be receiving full market value for the property, your rent could still go up unexpectedly.

Sublets

You’re subletting if you rent a home as part of an AST with other tenants and let someone else live in your room. This is generally not permitted, but some landlords may agree to it for compelling reasons. Because you’ll be giving up your rights and putting yourself at risk if your replacement doesn’t pay you rent, this is a rather

What is HMO, and how does it work?

Shared Accommodation

Houses in Multiple Occupation (abbreviated to HMO) are generally large houses or flats where 3 or more unrelated tenants share the living space. Where a Build-to-Rent property may offer one or two bedroom apartments with communal facilities that renters can access, an HMO will have a communal living room, kitchen and perhaps dining areas. Often, HMOs will be managed by a management company or landlord who oversees the day-to-day running of the property.

Are HMOs a good investment?

HMOs are generally more lucrative than regular buy-to-let properties. That’s because HMO rooms are leased separately, ensuring a multiplicity of sources of income. A three-bedroom home that yields a rent of £1,400 per month may be converted into a six-bedroom HMO by adding extra bedrooms and renovating the existing rooms. The new six-bedroom HMO will yield about £2,300 in rent per month, which brings the monthly income to £3,700.

What are the advantages and disadvantages of HMOs?

There are both advantages and disadvantages to investing in HMOs, as with any other property investment. However, if done correctly, there are some distinct benefits to HMO investment:

1. Increased yields

HMOs can produce greater rental yields than standard buy-to-let houses, sometimes by as much as three times.

2. High demand

Due to the fact that tenants are looking for cheap housing, the requirement for shared living accommodation is not likely to decline in response to economic upturn or anxiety.

3. Fewer empty periods

You have several other tenants paying their rent while you look for a replacement for the vacant room as soon as one tenant leaves.

Important things to consider before investing in an HMO:

Shared Accommodation

1. Restrictions in area

Although HMOs can vary in size, they are often located in less desirable areas where the rental rates are cheaper. As such, it can be more costly to maintain an HMO than regular housing. However, if the property is managed correctly by a professional company there shouldn’t be too much trouble with maintenance.

2. Legal requirements

As with any rental property, HMOs must comply with legal regulations such as having fire escapes and smoke alarms. If the house is not in compliance, it is unlikely that you will be able to rent out your rooms. It’s also worth checking whether planning permission has been granted for the conversion of the home into an HMO.

3. Heavy restrictions on personal use of rooms

HMOs often have rules stating that common areas such as kitchens and living rooms must come under the management of the landlord or manager, meaning you don’t get free reign on your rental income from these spaces. It might be a good idea to consider this carefully before committing to an HMO.

4. Risk of damage

The shared living arrangement means that you could have problems with tenants damaging your property. If this happens, it is unlikely that either your insurance or the increased rent will cover the costs of repair. This could be particularly problematic if several tenants are caught causing damage simultaneously. It may be worth setting out rules for using communal areas to avoid these problems.

5. Decreased privacy

As with any shared living arrangement, you may find that the tenants engage in behaviour that annoys or disturbs you, such as late-night socialising or parties. If this is the case, it will be difficult to enforce your desire for them to keep noise down because of the communal nature of the property.

6. Restrictions on tenants

As an HMO landlord, you might not be able to rent out your property to certain groups of people, such as families or students. This can be frustrating if demand is high for these types of tenants.

7. Decreased rates of tenant occupancy

You will risk having fewer rental guarantees with an HMO, as guests of other tenants are more likely to stay over. This can pose problems if you need to rent out your rooms for a certain period every year, rather than fluctuating with different tenants throughout the year.

8. The physical structure of the property

The actual structure of an HMO may not be suitable for everyone – the rooms may be small or the property might not have enough bathrooms. If you are not comfortable with having tenants on-site, investing in an HMO might not be for you.

9. Preparation costs

For each tenant moving out of your property, it will cost more money to make the necessary changes. This is because any changes made to the property should be done in a way that is appealing to all future tenants, not just your individual preference.

10. Management costs

Managing an HMO may be more labour-intensive than managing standard housing, and can result in higher management fees for you if you choose to hire a dedicated manager. It’s also important to consider how much of a role you yourself will play in the management of your property, if at all.

What are the benefits of using RentLondonFlat?

Shared Accommodation

RentLondonFlat is a property firm that is creating specialized marketplaces to cut the expense of renting, living in, and moving houses for owners and guests in the long-term residential rental market.

Offering a specialist multi-channel service with the most exclusive, high caliber and attractive homes in London. We assist private owners or associations manage their property. This might mean that we take over the complete management of your building such as taking care of renovations and maintenance, supplying bookkeeping administrations and leasing administrations to tenants, overseeing tenancy contracts and compliance obligations under the Tenancy Agreement, arranging everyday upkeep that the building is in agreement with any conditions of consent, and undertaking tenant stock rotations.

We’re on a mission to make moving, renting, and living in cities across the globe less expensive. We believe that by providing frictionless marketplaces where owners and guests may interact online, we can challenge the current norm of high rental transaction costs.

Regulation of the long-term property rental industry has become increasingly difficult as regulators have regulated it. To assist our clients, we try to make the rental transaction as simple as possible. Our Rental.Artificial.Intelligence.Assistant (RAIA™) does this by reducing the time and cost of renting, bringing digital technology to the long-term property rental industry.

By attempting to make the rental transaction as simple as possible, we are able to create additional value for our clients and their users without increasing costs or making it more difficult for them.

We are a modern and progressive property rental service that is still subject to UK Housing Act guidelines. As such, we are also a fully licensed UK Letting Agency and active member of several Regulatory Bodies. We can provide our clients with the comfort that we operate under a strong regulatory framework and code of conduct. Both Landlords and Tenants may feel safe in knowing that we are fully compliant with the law.

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