HMO Room Rents - how do you break down rental costs or dont you bother ?

[Bel]

my main point which seems to of been lost is that to compete with huge companies that usually have huge financial backing

It's not really a race though is it. The LL's were there first. The established ones are financially backed very well thank you. They don't really care if some young pretender wants to make a quick buck when market conditions don't really make many new BTL investments worthwhile whether it's students or otherwise.

The LL's advantage is that they can respond to market changes much quicker then any bank-controlled, labour intensive, managed top heavy structure. I would say that savy LL's have the more sustainable future. The new sheds are up are commited to the banks or investors who want a return. more eggs in one basket etc.

(Of course halls on campus have a monopoly on 1st year students that goes without saying.)

[hech123]

I don't know where you are getting these figures from. They are nonsense.

I am getting from the fact that many of these institutions have huge portfolio's and very little debt. Impact housing for instance are nearly 40 years old and have 3000 properties, they own 1 halls of residence.

Common sense tells me that they can reduce rents sufficiently as the rest of their portfolio will pick up the slack. I would not be sitting here thinking that I have a huge advantage over them and that they will just leave them empty over the next few years, this is one example.

Basically you guys are the local corner shop owners sitting there saying 'Yeah Tesco is opening up next door but we are better and have more friends in the community'. I am sorry you guys can not see the basic fundamentals. In 95%+ of these kind of scenarios it is usually the bigger companies who win, I see this as quite similar.

[mind the gap]

Show me any student accommodation provider who lets rooms at £12 per week - or rent-free - and you might be able to claw back some shreds of credibility. Otherwise, I maintain that those figures are silly.

The bottom line is that there will always be a need for 'pack 'em in, stack 'em high' micro-managed hangars for international students and first years, but most second and third years prefer to be paying a lower weekly rent in a real house, in a real community, not an characterless rabbit hutch where they are ripped off to the tune of £100+ pw. For that amount in most university cities, they can get something high end with wall mounted plasma TVs, walk-in showers, cleaner, etc. Why on earth would they opt to go back into the type of accommodation which they spent most of their first year looking forward to getting away from?

You are underestimating the rite of passage factor.

[hech123]

I am unaware on anyone letting at that rate but it is an example of what they could do if they wanted to. The figures did seem silly just as all the voucher deals Tesco used when my local shop went out of business, then the vouchers stopped. Another one that seemed really silly was the VUE cinemas charging only £1 for shows but again that stopped when the local Lonsdale went out of business and now its £8.50.

It may seem silly but you will not be laughing if you are invested too heavily in this market.

[midlandslandlord]

It may seem silly but you will not be laughing if you are invested too heavily in this market.

Agreed that it is a possibility, though in the institutional and fringe markets.

However I'm still disagreeing with you for student houses in decent condition in decent places :-)

Seven reasons:

1 - I think you underestimate University overheads, and their sheer *greed/need* for profit.

I now know that my "nominated" houses are being withdrawn from our local Uni so I can talk a *little* bit more openly. These ratios are spot on, but the numbers are rounded.

In our case houses have been rented out at currently £4000 a year ish per student, and have been on the same arrangement since before 2000.

This year we receive approximately 55% (£2200), the Uni taking 45% for management, finding students, providing a front-desk service, and paying for inclusive gas and electric (approx £400 per year per student). We pay for repairs, summer maintenance, and also (for some mad reason) water (approx £150 per year per student). That 45% charge was between 30 and 35% ten years ago.

A top notch private lettings agent will charge me 13-15% for a full management service, and the rental will be exclusive of bills not inclusive, including the water charge.

Take utilities out: call the Uni rent £3600 exclusive per student, and my cut £2050 to allow for the water bill.

Therefore my rent including the agent commission needs to be something like £2400 per student for me to make the same return, which leaves me the capability to reducing the rent by a third and *still* take no cut in return.

In practice next year the Uni is likely to try and apply a 5% increase to equivalent accommodation, so that £3600 becomes roughly £3800.

And in reality we are likely to spend on a serious upgrade, and undercut what the Uni rent for our houses in their pre-upgraded position *would* have been (had they kept them) by perhaps 10-20%, while taking a nice boost in our return.

2 - I don't believe the market is as loose as you suggest.

Student entries fell by 12% this year; but that is exaggerated by a surge last year to get in before fees trebled.

3 - I don't believe that there is such a supply glut as suggested. Even with all the bulding projects, uni or privately provided institutional accommodation is still a relatively small part of the market.

Even Unite only house around 1 student in 70.

4 - Institutional accommodation is pulling away from 'shared bathroom' rooms, and going upmarket. At a time of financial challenge, that is insane. I'm happy to bet on students liking lower rents in a modern setting, rather than gyms, ensuite bathrooms, and a concierge service.

5 - I don't see Housing Associations engaging in price wars after entering new market segments when their public funding has been cut to an extent that some are fearing for their very existence.

6 - Councils up and down the country are leaning *heavily* on the supply of student houses - more competition amongst customers for us incumbents. It's an insane policy, but then many Councils have bullheaded fools setting their rental policy.

7 - Students *like* living in houses.

ML

[mind the gap]

That all makes perfect sense, ML.

Except that I wouldn't balk at making the Ts pay the water rates. Keep them in the real world...they get away with paying no Council Tax - they can cope with about £1 pppw in water and sewerage charges. It's a third of a pint of beer less per week. They don't buy books or CDs any more (or they download them more cheaply onto their i-readers/iPods), so they can afford it!

I would say it is our social duty to educate students in the noble art of paying for what they consume, especially energy. That way (hopefully) you get fewer numpties who think that hot water is piped into private houses (from outside) by the Council, free, as one of our Ts once thought. We enlightened him.

If I were Prime Minister, I'd have them paying Council Tax, too!

[midlandslandlord]

That all makes perfect sense, ML.

Except that I wouldn't balk at making the Ts pay the water rates. Keep them in the real world...they get away with paying no Council Tax - they can cope with about £1 pppw in water and sewerage charges.

Cheers.

That was actually - for whatever reason - a University condition.

Tiz bizarre - 2 houses, and every year one has about double the bill of the other one; it's not always the same one, and the houses are identical. And these are on meters.

I checked if it was male vs female, and it isn't.

It's closer to £3 per week per student, though.

ML

[mind the gap]

Cheers.

That was actually - for whatever reason - a University condition.

Tiz bizarre - 2 houses, and every year one has about double the bill of the other one; it's not always the same one, and the houses are identical. And these are on meters.

I checked if it was male vs female, and it isn't.

It's closer to £3 per week per student, though.

ML

Ah. Ours aren't on a meter. It's about £350 per year between 6 of them.

[midlandslandlord]

Yep.

Ours are newbuild around 1997 so required to be metered, I think.

ML

[Phlash]

Student HMO's are dead get out whilst you still can! They are moving firmly towards very large professional student blocks from big companies, everyone can see it. Areas are slightly behind depending but this market is well on the way to saturation, get out now!

Sorry, this is baloney. Scare mongering at best.

Is that why Unite dropped their room rates to £60 pppw when usually they are £120? Only one things drives price down, demand.

Some student HMOs will die - those that ignore what is going on around them. There is plenty to be done however to make your house attractive to students.

We have let 73% of our student rooms already for 2013/14 - That's in a city where there are 6,000 spare student rooms next academic year. 'House hunting season' doesn't start until 21 January, by which time I expect we will have let everything. That isn't very 'dead'.

I'm about to write a blog on it all, facts and statistics included, I will post a link to address your fear at some point over the Christmas period.