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The HMO model has stood the test of time. Or are you leaning towards the luxury of co-living spaces? Both companies target the coliving market. Tenants rent private bedrooms and share common spaces. HMOs are functional. They tend to have few amenities and communal areas. Their goals are more upscale than their modern counterpart. They can attract renters who want a strong community with premium amenities. Co-living essentially means HMOs with economies of scale.
Proptino Manager explains which one is aligned with your investing strategy. Read further to discover the distinguishing options of HMOs and co-living.
Joint tenancy is a co-ownership system for real estate. It allows many people to have equal shares in the property. This means that each of them has an equal interest in the property, in that he or she has the right to enjoy and possess it. These rights of the property are transferred to the other co-owners in case of the demise of any of the co-owners.
Joint tenancy is a property law concept. It allows several people to own and possess property. Most states allow joint tenancy if four unities exist: time, title, interest, and possession. This means that all joint tenants must buy the property together, at the same time, and with the same interest in it.
There are several advantages to the joint tenancy. Joint tenancy is a way to hold property. It allows for automatic property transfer upon the death of one of the owners. If the interest in the property passes to the other co-owners, there is no need for probate court. Also, joint tenancy lets many people pool resources to buy property they could not afford alone. It also allows several parties to share the costs of owning and running real estate.
These unified tenancies require that the property subject to the joint tenancy meets four conditions: time, title, interest, and possession. This means all joint tenants must enter the property at the same time. They must have the same interest and right of occupancy from the same transaction.
There is another requirement that has to be fulfilled before the co-owners can proceed with the joint tenancy – the home has to be bought by both of them at first. This may be done under one purchase contract where all the parties are described as buyers or under several individual purchase agreements that are combined to form the tenancy in the joint.
In any case, it is important to ensure that all the involved persons are acknowledged as co-owners on the deed as well as ensuring that ownership is correctly transferred to all the parties.
On acquisition of the property, the co-owners get custody of it and are entitled to the use and enjoyment of the property. They will also bear the responsibility of paying property taxes and maintaining the property and or home. Concerning the responsibilities of the co-owners, one has to pay bills and make reparations if necessary, this fact has to be comprehensible for all parties. This may be a large advantage as it results in a quick transfer of the property and does not necessarily undergo the process of probate.
This means that the co-owners should also always be prepared for any situations that may compel one of the co-owners to dispose of some of the shares in the property or property being shared again among the co-owners.
As shared accommodation grows in popularity and provides an opportunity for asset growth over the long term, property investors will keep moving ventures into HMOs: a heavily regulated, saturated yet profitable market. Next, let us consider these alternate approaches from a different perspective.
Wales: Still one of the most sparsely populated countries in Europe. Did you also know that 10+ million more people now live in Britain than lived here back in 2000? By 2050, another minimum of four million is projected to be added. However, the total land area would be the same and even a bit less due to climate change during the next 30 years. Architects and developers face a major problem due to this population growth, particularly in large cities.
With our population on the increase, we need creative housing solutions to cater to everyone and preserve Britain's rock-solid home standards. This has led to the creation of HMOs —which are very well-suited and sustainable for delivering low-cost housing.
It is not uncommon to learn of HMO accommodations that barely tick the box for a roof over your head with overcrowded kitchens, crammed bedrooms hidden behind outdated facilities, and little or no regard given to safety standards. And that is without even getting into their taste. The reality is, that the majority of times it's poor design decisions that spoil both HMO living standards and an investor’s return.
Lower risk of losing money to void periods with multiple tenants Simply put, when one tenant leaves you still have others there paying rent, so the income drop is not as significant.
It can create a better return for the property manager than letting out the whole property as a joint tenancy. That means there is the opportunity for a variety of supercharged rental yields, compared to other single-let properties — something which can have significant implications on your bottom line as well as return on each investment.
HMOs cover a wide range of demographics, in particular students and young people. which means you will always have a good number of prospects looking at your property. HMOs are often among the cheapest types of housing — this is why young people, and the working class go after them.
In HMOs, student companies may find HMOs easier to rent by room rather than one single student contract. That is because most systems do not provide for multi-units on the same property.
An owner can create a room-by-room rental using Arthur and keep the letting all under one roof while having to manage EPCs and GSC in multiple places.
Of course, HMOs will have high turnover tenancies. This can result in extended periods of downturn as the costs to find new tenants increase. Since the landlords keep on changing, this can rapidly induce unwanted wear and tear to be inflicted upon a property.
Property management is all about relationships and with new tenants coming and going every hour, it can be tough to always get a head start on building rapport. This often leads to the management of HMOs becoming much more complicated, as a property manager may have to face off with tenants over conflicts.
Additionally, communicating with tenants through the use of multiple communication methods may also become muddled. Arthur improves communications with the ability to integrate everything through a consolidated system This simplifies communicating with tenants and landlords so much ease.
HMO license applications are valid for five years from the grant date (new licenses only) when they must be renewed. Breach of license conditions can be punished by up to six months imprisonment or a fine, but the bill would allow for any future financial penalty handed out not exceeding £30,000.
It is hard to keep on top of all the criteria that apply with an HMO license and renting a property could see landlords non-compliant as long they struggle to manage their obligations.
This might be a huge advantage, as it fosters the fast transfer of the property and the shunning of the probate court procedures.
⦁ Another important beneficial factor that can be noted as the main reason behind the selection of joint tenancy is the consolidation of efforts and purchasing of the property that a co-tenant could not afford individually. This is especially important for people related by blood marriage or friendship who may at some point intend to invest in property but cannot afford to do it individually. Joint tenancy allows many parties to have the property ownership and management duties as well as the cost division and as such makes the costs incurred in owning the property to be cheaper to the co-owners.
⦁ Joint tenancy also has a benefit in the area of taxation, and this is one of the considerations that make people purchase properties in this manner. In most occasions, the property will even have an assessed and taxed value by the overall value of the property and not per individual’s worth in the property. This may lead to a significant reduction of the property taxes and thus may benefit the co-owners.
⦁ Besides, the shared tenancy may provide financial security to the co-owners and let them know that they won’t have to face the escalating cost of a property for a certain period. It allows people to get involved in sharing the benefits that are associated with property ownership without exposing the property to other forms of litigations that may affect one of the co-owners. It is protected in the usual guarantees, for example, bankruptcy since many persons own the property.
⦁ Joint tenancy also provides more liberty in the utilization of the property all through. The co-owners may use the property for any legal purpose, which may include the use according to its zoning as residential or commercial, leasing, renting, or otherwise using the property for any other legal purpose. This also provides for alterations by one or more of the co-owners so long as all the co-owners consent to the same.
Read also: How to live landlord and Tenancy right and responsibilities Uk?
Joint tenancy: All tenants rent the entire property together. It can be tricky to evict only one person if relations go wrong among the tenants. If things turn nasty or unstable between the people, there it can bother everyone and force all to flee.
Disagreements over property or finance can cause tension between tenants in a shared home. But it can also be about the property manager since they might have a certain routine dealing with a single tenant behaving poorly on their investment.
In conclusion, the better option depends on the landlord's priorities: managing an HMO or a joint tenancy. While HMOs can provide higher returns, the downside is there are also high rates of tenant churn. By contrast, joint tenancies are easier to manage but restrict exit control. In the end, which is best depends on your risk tolerance as a property manager or landlord.
