John Healey, government Housing and Planning Minister, recently announced details of various new plans and legislation that will affect landlords, including the news that landlords will soon require planning permission to turn a residential property into an HMO (house with multiple occupation) with three or more unrelated tenants living in it.

Under the current legislation, you only need to obtain planning permission from your local council if the property will have six or more tenants living in it. Whilst the idea is that it will help give more control over unregulated changes and improve standards for tenants, it may not be quite such good news for landlords, especially as they’ll be more paperwork and waiting involved.

The new legislation is due to come into force by April 2010 and will affect any new plans to change the use of a property and turn it into a new HMO. Local planning offices are often already busy, so applications could take a while, which may deter some investors from going down this route.

If you’ve already got an HMO property, then this is unlikely to affect you, but would it put you off plans to opt for HMO properties in the future? We’d love to hear your views.

As recent news reports have highlighted, increasing numbers of students have applied for university this year and in university towns and cities across the UK, there is always a demand for good quality rental accommodation and HMOs – Houses in Multiple Occupation.

Even where there are universities with halls of residence, there’s often not enough room for all first year students to have a place in halls, and some want to live elsewhere anyway, and it’s common for students in subsequent years to want to move out and share a house with their friends.

Although students are often earning nothing or only a small amount from evening or weekend work, when you’ve got a shared house with multiple rooms available, you can still gain a good amount from rent and achieve decent rental yields.

Most university towns will have areas that are typically populated by students in rental accommodation and HMOs and generally property prices in these areas are lower to start with – which is another benefit for investors.

Since 2004, anyone investing in HMOs needs to gain an HMO license. Although it can take a bit of time to apply for the license and meet the requirements, such as installing fire alarms, it’s an essential and necessary part of the process.

If you’re thinking of going down this route, then researching the areas and identifying the places where student accommodation is popular is highly recommended, as you want to ensure your property is in an area where students want to live.

It’s also essential to check out the rental rates in that area – now is a good time to investigate, as properties are being advertised to attract the new intake of students – and look at what they offer in terms of fittings and furnishings.

Although it’s often assumed that student accommodation will be basic, properties offering added extras, such as satellite TV, broadband, gardening or even a cleaner, may command higher rental fees.

With property prices currently low, buying in the right place for student lets could be a great investment.

Source: David Coughlin – HBF Investments