Sub-leasing of rooms... Thoughts? Advice?

[Pole84]

Hi,

I had an idea recently with regards to sub-leasing properties to individuals. Say I were to rent rent out a 5 double bedroom house in London (where I live and could control the place) for £2000 a month (£460/week) and rent out the room to individuals (e.g. students) on a medium to long-term basis.

Rent would be all inclusive and I think I could comfortable charge £150/week per room which give a monthly revenue figure of £3250, and a monthly gross profit figure of £1250

Out of that would come out bills (elec, gas, water) of approximately £300 a month, council tax of say £250 which still leaves £700 net profit a month.

Has anyone ever done this kind of thing? Any major issues or hurdles I should be aware of?

I would rather go the legal route (which may be uncommon in this kind of agreement) and register a company that would specialize in this.

Thanks for your help, and sorry for the rambling nature of this post... thoughts are all over the place with this at the moment

 

[estwig]

What your talking about is an HMO, house in multiple occupancy.

google and singing pig will help.

Also talk to your local building control.

 

[mark_s]

This sounds like a good idea. Are there places out there that allow you to rent from them and then sub let. I always thought it would be in your rental agreement that you couldn't sub let

 

[sellickbhoy]

ah, the joys of the HMO licence!!! it's not cheap, but look into the costs of that 1st

then there is gas safety certs too. enviromental certificates for any property you want to let out (though that's a one off and lasts 10 years!)

if you are planning to let the rooms individually you could be onto a lifetime of misery! best to get 5 people who want to share - but even that won't guarantee you any less misery

5 folk who don't know each other means arguments and tenants changing regularly - so you won't have 100% occupancy all the time. So you'll be constantly looking for new tenants

students tend to disappear for the summer too - so thats another couple of months you are exposed for

also, a lot of landlords won't let you sublet their property. But if you do find one who will then fine.

you'll spend a lot of time getting keys cut too

 

[Taylorn]

Councils are getting really really strict on HMO's and coming down on people who don't have licences. A landlord in my area got fined £20k not long ago which I think is the maximum fine for letting without a licence. You will need to have proper fire safety regs etc... Definitely go on singing pig there is a whole forum dedicated purely to HMO's.

Good Luck

 

[murdoch]

I dont think you would have much luck unless you owned the property, but I may be wrong.
Personally I rent a property out and I would never agree to someone renting it from me and then subletting rooms.
The increased wear and tear a property, the increased risk of problems such as bad tenants or criminal tenants (would you do full reference and credit checks on all the tenants?) and the fact the property may need minor structural changes during the occupancy, would mean that unless you own the property, there is little incentive for a property owner to allow someone to rent off them and run an HMO in their property-
unless perhaps you offered a larger than normal deposit and payment up front for a years occupancy.

 

[Camille-I]

I thought it was normal and had no laws or regulations forbid this. As there are many people did this around me. They earn the middle benefit. It was oftenly especially in Crowd and busy morden city. Many people need rent rooms.

I guss you may could get more latter.

Good luck!

But one thing to remind, you must make sure the rooms are safe to live for people, no fire or other accidents happen. This is important.

 

[Pole84]

ah, the joys of the HMO licence!!! it's not cheap, but look into the costs of that 1st

then there is gas safety certs too. enviromental certificates for any property you want to let out (though that's a one off and lasts 10 years!)

if you are planning to let the rooms individually you could be onto a lifetime of misery! best to get 5 people who want to share - but even that won't guarantee you any less misery

5 folk who don't know each other means arguments and tenants changing regularly - so you won't have 100% occupancy all the time. So you'll be constantly looking for new tenants

Ah, the joys of red tape... I would need to look into the cost of the license... Are we talking < £100 (yes, i am hopeful here )

I guess the main issue to consider would be the quality of the tenants. My idea is founded on having tenants that would cause no issues and pay on time... such as myself (I love to write my own reviews btw ) This is probably not the reality out there.

I would go for a minimum 3 month contract to avoid the hassle of constantly searching for tenants. I guess I would set up 5 individual contracts the pretty much mirror the original contract (as I found out from the HMO website -thanks for the link estwig)

Personally I rent a property out and I would never agree to someone renting it from me and then subletting rooms.

Would you consider it if you had a % of the profit. What would you be prepared to accept a premium for removing sub-letting restrictions. I managed to get my own landlord to remove the line without any hassle whatsoever.

 

[LBtrading]

This sounds like a mix of two strategies and could be possible but quite complex,

The new hype in real estate investment is whats called "lease options". Lease options are fairly common else where like australia, basically you can buy a property without a mortgage or finance, what you do is find someone that wants to sell a property but cant get the price they want because its a recession and offer to buy it for its market value, but instead of going the normal route of mortgage you agree to to take over the payments of there mortgage (leasing the property from them) for a certain period say 5 years with the option to purchase at the price agreed any time in the five years, you also agree that you can sub let the property.

With lease options you are not obliged to complete the purchase if you dont want to but the seller is obliged to sell if you wish to buy. So basically if you set up a lease option on a 5 year agreement and agree to buy a house for £150,000 and cover mortgage costs of £400 month then you can then sublet the property at say £600 and earn £200 month profit and if the property prices rebound within 5 years and suddenly that property is worth £180,000 in 4 years time you can still purchase at £150,000 making a nice profit, and if it falls in value then you dont have to purchase and can take the posative cashflow of the rent or re-negotiate.

so you could find that type of deal and then do a HMO,

you will need to do a lot of research on this though.

check singing pig forum as well, its a great forum with lots of helpful people