UK government agencies (UKGAs) act on behalf of the Government’s Home Office in securing accommodation for ‘persons at risk’. There are 3 such UKGA’s that represent the entire country in sourcing and managing rental properties, with lease terms of, typically, 5 years.
Though the rental yields are lower than that of Retail HMOs, a UKGA HMO is especially appealing to investors who are risk averse – as the rent is secured and not dependant on physical occupancy.
Rent is paid on a monthly basis based on the number of bedrooms in the property, regardless of occupancy. Furthermore, all internal repairs and upkeep of the property is undertaken by the UKGA, resulting in a completely ‘hands off’ investment.
UKGA HMOs are a council’s cost-effective solution to help meet local housing requirements and are now renting HMOs directly from private landlords.
This latest development offers a number of benefits to an investor:
- Fixed Rental Income for the duration of the lease
- 5-year fully repairing internal lease. UKGA responsible for all internal repairs
- No void periods. Rental is paid regardless of whether the room is occupied or not
Properties that are not pre-existing HMOs will require a HMO License. These can be applied for once any required renovation work is completed and a site inspection by the local authority is undertaken. The process for securing a HMO license typically takes 4 weeks.
Considerations
- A property is required to fulfil regulatory health and safety standards, namely: Bedroom size minimum of 6 s/m, an additional toilet for HMO’s of 5 bedrooms or more, a window for each bedroom, a communal area for dining/relaxation, fire and safety features
- Not all areas/councils within the UK require UKGA HMOs at any given time
- Choose localities that are already considered popular UKGA and/or Retail HMO communities