I am looking for a house in a coastal town. The condo I looked at has way more space than I could ever afford anywhere else.
But there’s a problem. A former care home next to the flat has been converted into a House in Multiple Occupation (HMO) with 20 beds.
Would I be crazy to go ahead and buy the condo? What factors should I take into account with the HMO below? Will it devalue the flat?
And why are so many healthcare organizations allowed at locations like these?
Jane Denton of This is Money responds: The district council in which you want to buy the property has already promised to be stricter about the problems that can arise from HMOs, including noise pollution and parking.
But the council still appears to be giving many properties in the area the green light to become healthcare facilities.
Be careful: living next to a healthcare organization involves risks
I did some digging and it appears there were over 100 local objections to the 20 bed HMO you mentioned, but it was passed on by the council.
If you can, talk to the owner of the flat you want to buy or other neighbors on the block.
They can tell you what problems may arise from the HMO next door.
Given there were so many objections to the HMO, I suspect there is significant hostility towards it.
Waste collection, parking, noise and other anti-social behavior can be problematic.
And because the HMO is large, you’ll likely see a high turnover of people throughout the year.
If you are looking to sell in the future, having a large HMO next door could negatively impact the value of your property.
You’ll have to weigh up whether getting a larger flat than you could otherwise afford elsewhere would be worth the potential problems associated with living next to such a large HMO. I asked two experts for their opinion.
Jonathan Stephens, director at Smart Landlord, said: There are a number of things to look at before deciding whether the flat is right for you and whether it is likely to be negatively affected by the HMO next door.
A 20-bed HMO is a sizeable operation so it is important to understand how well it is managed, the quality of the accommodation, the likely tenant profile and whether good systems are in place to manage noise, waste, maintenance and parking.
Problems with HMOs typically arise from poor management or high tenant turnover.
Noise pollution, parking pressure, waste, frequent changes of residents and poor maintenance can have consequences for local residents.
Jonathan Stephens is director at Smart Landlord
That said, a well-managed HMO with responsible tenants should have very little impact on neighboring properties.
I visited the apartment as often as possible before I bought it, including evenings and weekends.
I wouldn’t rely on a single 20 minute viewing in the middle of the day.
I would also walk around the immediate area and take a good look at how the HMO itself is maintained.
Local knowledge is extremely valuable. Talk to neighbors and other people in the area.
Nearby property and rental agents can also be a good source of information, especially for those not involved in the sale of the flat or the management of the HMO.
They may be able to indicate how the HMO is experienced locally and whether it has influenced the environment.
As to why HMOs are appearing in coastal locations, it is often less about the coastal location itself and more about the commercial viability of operating a HMO where property values are relatively low.
Landlords may be able to acquire larger buildings at lower prices and improve their returns through economies of scale.
Ultimately, as a prospective buyer you must build up as complete a picture as possible of both the HMO and the immediate environment.
A HMO next door does not automatically devalue a property, but if it is poorly managed or has created a negative perception of the street, it can affect its marketability and value.
When you have a broader picture, you are in a much stronger position to make an informed decision.
Michael Zucker, a surveyor at north London estate agency Jeremy Leaf & Co, said: With the growth of the railway network in Victorian times and the development of seaside resorts, large luxury hotels and smaller guest houses were built to accommodate the influx of tourists.
However, with the advent of cheap foreign travel in the 1970s, most British seaside resorts lost much of their tourist industry and the hotels and guest houses were no longer viable.
The larger hotels were often converted into care homes and smaller guest houses became attractive to buy-to-let investors who could buy them at low prices before converting them into care homes to maximize their returns.
Many local authorities encouraged the growth of healthcare organizations to provide a range of housing options for different people, including those on lower incomes, NHS or hospitality workers and students.
Many seaside resorts now have a reduced amount of industry or a depressed economy, making it cheaper for investors to buy large properties suitable for use as care farms.
The quality of these HMO properties varies enormously and can affect the value of nearby private apartments and houses.
If the HMO is let to professional tenants and maintained to a high standard, the negative impact can be minimal.
However, once a property is classified as a healthcare facility, it is likely that it will remain so for the foreseeable future.
A future change in ownership of the property could see maintenance standards drop and the caliber of tenants change.
There is no guarantee that adjacent properties, of any type, will not change character in the future, for better or worse, but realistically the existence of an adjacent HMO will have a negative impact on marketability and value.
Before purchasing the flat, it is a good idea to visit the area at different times of the day to see if there is any disruptive anti-social activity. An external inspection from HMO will also indicate the maintenance level.
It is very difficult to estimate the percentage of negative impact on a nearby flat because there are so many factors involved.
However, if the HMO allows you to purchase a property of better quality and size than you could otherwise afford, you may want to think about it and weigh the pros and cons.
Also try to speak to existing owners of other apartments in the property to determine if there have been any problems.
