Repost - went to edit but deleted original in error
Hi I’m buying an HMO with 5 self contained flats all with their own EPC (£45kpa). The property is freehold and under one title. I’ve had a modest portfolio previously but a mix of semi, apartment, cottage etc. I dropped out before covid hit.
I’ve no great aspirations for empire building so it may be my only HMO for retirement. Licensed for 8 over 4 floors. My belief is that I will be better off as a ltd co as one thing I’ve noted is also the ATED which kicks in at 500k, the purchase price of the property is 450k. I was also aware that the arrangement costs/fee for my HMO mortgage could be set off as acquisition costs? There’s possibly a 5 year fix of 4.2% with a 9k arrangement fee.
I’ll be a higher rate tax band at 40% (£50,271 to £124,140). I also have a separate VAT registered business selling capital eqpt off a website which currently gives me 30k net (sole trader)
The property is in South Wales so tenants are on occupation contracts. Looking forward though the property does lend itself to development of say 2 x flats plus top maisonette. The property is quite substantial.
Therefore with this in mind there will be quite a considerable capital gain when these 3 properties are finished/developed/sold. Alternatively the plans could be submitted and then if approved to sell with planning approval (a less complicated route).Thanks in advance. Regards
I assume that there are some shared rooms in this property, even if its only a toilet on a half landing? If not, then I can’t see why its a s254 HMO. HMO’s require a lot of management and the legislation surrounding them gets more and more onerous for landlords. If there is an easy way to remove any shared rooms and just make each unit fully self contained, then that’s the first change that would be worth considering as you’d then just have separate lets which would be easier to manage. It may still be a s257 HMO if converted pre-1992, but that’s much less of an issue. You could then sell them off at different times if you needed to.
David they’re 5 x fully self contained flats currently all occupied by professionals. There are no shared facilities. Each separate flat has its own EPC.
So the property is large enough for a potential conversion to a ground floor flat, a first floor flat and a maisonette in time. My imminent thoughts are as things are moving along is whether ro buy as an individual or a Ltd Co. I’m swaying towards Ltd Co.
From what youve said, the building would not appear to meet any of the 3 tests for a section 254 HMO. As I said, it may be a s257 HMO, but any licence would only then apply to any common entrance hall and common stairwell. If the Council have judged the property to be a s254 HMO, I would suggest you get that decision reviewed.
Does each unit have separate tenancy agreements or is it one for the whole building? I cant see how the latter would work if each has exclusive occupation of part of the space.
This needs more explanation before Id be interested in it as you may have some historical mess to untangle.