Advice wanted on proposed HMO

[debpike]

My husband and I own our property outright, worth about £150,000. We are considering buying next door for approx £140,000 and joining them together to make one house. We have already approached the Council about this and they have advised us they can see no reason why these plans would be declined (we have not mentioned the possibility of us renting as an HMO).

Once we have made the improvements there will be 9 en suite bedrooms, with shared kitchen facilities, that we are proposing to let room by room. This would give us a rental income of approx. £900 per week and we want to use the rental income to purchase a new family home for £300,000-£350,000. We also have £60,000 in available savings of which we would use approx. £30,000 to convert the two properties.

We have no other major financial committments and we would like to know what is the best way to raise funds for this project, bearing in mind my husband is already a higher rate taxpayer and would probably want to have an interest-only mortgage for tax purposes. What are the long-term tax implications of this type of repayment system. Does it have to be a Buy to Let mortgage? Will we be able to raise a mortgage on rental income to purchase our primary residence?

Also, we could make the rooms have their own external front doors/patio doors leading to an enclosed courtyard garden with access to the communal kitchen/dining room. All the rooms are on the same floor and the farthest distance to the kitchen would be a max. of 8m. Is this likely to be acceptable? will the property still count as one house with multiple tenants or become flats? Plans are available via e-mail.

Thanks for your help.

[Patois]

1. If you want to create an HMO from a single dwelling you will need Planning Permission
2. How many kitchens for 9 lets? Just 1? - each LA has its own standards - my authority would not entertain communal facilities for independant individuals unless there were exceptional circumstances and only then at a ratio of 1 kitchen for 3 individuals.
Larger 'Groups' of friends can share at a ratio of 1 set of kitchen facilities to 5 residents
3. If persons are sharing kitchens/bathrooms etc. then it would be an HMO.
4. Your Mortgagee would need to know - you will need to consider what level of insurance you want.
5. Is it 3 storey or more? It may need licensing from October

Finance? - think you need more info before you even research the finance angle.

In other words forget it unless you are prepared to do more research.
This site has a lot of very good info on HMO's - read it and then if you have any specific questions......
Also
Contact your local authority - they should have EHO's who deal with Private Sector Housing, contact building control and planning.........

[justaboutsane]

DebPike, Contact the local Environmental Health Officer who will meet you at the property and discuss the way forward regarding HMO. We have recently done this in Derbyshire and they have been extremely helpful, we will shortly be meeting with them again and also the Building Regs people to prepare a schedule of work to get the property up to HMO standards. You have to remember there are different rules for HMOS.

The EHO has been fantastic to say that as we have approached him he is advising that we do the smallest amount possible to comply, he is not being heavy handed and saying we need everything they recommend. Had they been called out to carry out an enforcement order it would have been different but working with them from the start has given us a HUGE tick in our favour!

Good Luck x

[stu]

The EHO officer in the council where my HMO house is in have been brilliant, every step of the way he has been available for advice and inspected pro to the work, agreeded the plans and when he inspected after the work was done was happy to issue a HMO certificate on receipt of the cheque.

My advice is to keep the informed and send them copies of plans etc... I've taken the view that if you keep him informed then his life is easier when its time to come and inspect and hes knows what he is expecting !

HTH

Cheers

Stu

[Patois]

Stu
Then of course you may get a she!

:D

[stu]

To get me out of this one, "In my post above any reference to He / Him etc.. is non gender specific"

Cheers

Stu

:D

[Grange]

Westminster require one kitchen per 'household' - so probably one kitchen per double room in your house. Westminster have very strict interpretation of s352 of the housing Act 1988, but there is nothing to stop other councils changing their own regulations.

Before you buy, get an architect/land agent in and discuss your proposals. Then get something in writing from them so that you can sue them if they get their initial suggestions wrong (far from impossible). However, you are totally unprotected in terms of what the council may do to change the rules in the future.


>and would probably want to have an interest-only mortgage for tax purposes.

Don't understand you. What do you mean?

>borrowing for our new house...

You have your house with 150k equity, and put 30k of cash. You buy another house for 140k on 100% mortgage. So you have (assume) 320k of property with 140k of mortgage.

Then you want to put £30k down against a 350k house... i.e. a 8%ish deposit. Find a sensible lender who will look at the two houses together. You are right to secure the loan against your house as you will get a lower mortgage rate on buy-to-live than on buy-to-let.

However, you will be restricted on the interest relief you can get on your rental property to the cash you actually paid out. Say you bought your current house for 60k. And your new one for 140k, and put 30k cash in. You will only be able to get interest relief against tax on 230k; not on the 320k calculated above. On the plus side, you will get CGT relief if ever you sell as you will have occupied the property as your PPR.

[susan 2]

Hi - just a note. From my experiance, professionals hate sharing kitchens. I presume from the rent you are not going for the DSS/ Student market? There are always arguments about cleanliness etc. Which is why 15 years ago I changed my houses into studio and one bed flats. Which also made them very much easier to let. In fact I get about 96% occupancy. I would be interested to know other forum members views on this matter of sharing kitchens. Anyway best wishes with your plans Susan

[Vizard]

The single biggest problem with HiMOs is managing the kitchen. No one bothers washing their pots, and one or two people usually get put upon.

The law as it stands basically requires 1 kitchen per five tenants. However, I have a 7-bed let and I got passed with 1 kitchen.

Having managed a HiMO for 2 years now, I am stating to consider turning into self-contained accommodation. Management is too intensive as it is and occupancy levels too low. I get 10 calls for 1-bed flats for every one I get for bedsits.

Viz

[nli10]

I live in a 7 bed 1 kitchen house and to be honest depending on peoples schedules it can either be fine or hellish.

Luckily the kind of people that rend a 1 kitchen house aren't cooks (ready meal & take away kings) but these kind of people never do the washing up or kitchen chores...

I wouldn't even concider doing this in a house without a cleaner supplied for the propperty as no one takes ownership of the mess.