7-Bed Planning Hack, Valuations & NI Rumours Discussed [Community Q&A]

This week, we’re shaking things up. Instead of focusing on a single topic, I’m sharing some of the most thought-provoking debates and discussions happening right now inside the HMO community.

The truth is, the best ideas don’t just come from me sitting here deciding what to talk about — they come from you. From the questions you’re asking, the challenges you’re tackling, and the creative strategies you’re putting forward. And because we don’t always agree, the conversations are all the more valuable.

In today’s episode, we’ll dive into four hot topics:

• A Treasury rumour: could National Insurance really be charged on rental income? It’s unconfirmed, but it’s already raising big questions about valuations, market values, and what it could mean for landlords.
  
  
• A planning hack I never knew about even after 20 years in the business. A clever strategy to take your HMO from six to seven beds.
  
  
• Valuations under pressure: are they starting to come in lower, and what trends are we actually seeing on the ground?
  
  
• The great desk debate: should you put desks in bedrooms, and are fold-down versions really worth it? A surprisingly simple question with a lot of strong opinions.
  
  

Tune in to see where you stand on these debates and maybe pick up a new strategy or two along the way.

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Transcript

Andy Graham (00:02.67)

Hey, I'm Andy and you're listening to the HMO Podcast. Over 10 years ago, I set myself the challenge of building my own property portfolio. And what began as a short-term investment plan soon became a long-term commitment to change the way young people live together. I've now built several successful businesses. I've raised millions of pounds of investment and I've managed thousands of tenants. Join me and some very special guests to discover the tips, tricks and hacks, the ups and the downs, the best practice and everything else you need to know to start, scale and systemise your very own HMO portfolio now.

Andy Graham (00:40.643)

This week we're doing something a little bit different. Instead of me picking one topic to go deep on, I thought I'd bring you some of the debates, some of the interesting conversations that are happening inside the HMO community. Because honestly, some of the best ideas don't come from me just sitting here and thinking up what to talk about. It comes from you guys, from the questions that you're asking, the challenges that you're dealing with and the ideas and the strategies that you're sharing. What I love is that we don't always agree and that is what makes the conversations so rich inside the community. 

So today I've pulled together four really interesting conversations that have cropped up recently. Now, the first is a rumour that the treasury might start charging national insurance on rental income. I discussed this recently on the podcast. It's far from confirmed, but it's definitely got people talking about all sorts of things off the back of it, including valuations and market values and what could it mean if it did happen? The second is a planning strategy that I, after 20 years of doing this, didn't know about myself.

A fantastic hack to get you from a six to seven bed HMO. The third is questions that we've all been wrestling with recently about valuations. Are they coming in lower? Are they different? There's some really interesting points being raised by members in the community at the minute. And finally, a discussion about a more practical, slightly lighter issue, but whether or not it's useful to have desks in bedrooms and whether or not fold down desks are actually a good space saving solution. Sounds simple, but actually this generated a huge amount of interest on the thread. And I thought it was definitely worth discussing on the show. So there we are, plenty to discuss today. Let's dive in. Please sit back, relax, and enjoy today's episode of the HMO Podcast.

Hey guys, it's Andy here. We're gonna be getting back to the podcast in just a moment, but I wanted to very quickly tell you that we have got a huge sale on the HMO Roadmap. For a very short space of time, you can take advantage of a massive 20% discount off our premium package, and that gives you absolutely everything that we have got. And trust me, there is more than you could possibly imagine. We are by far the largest vault of training and education and content and resource.

Andy Graham (02:47.919)

for HMO investors anywhere in the world. And it's not just built by me, it's built by you guys, our community. It's unbiased, it's transparent, and it covers absolutely everything. And it is so incredibly rich in detail and value. Just head to thehmoroadmap.co.uk right now, grab yourself that 20 % discount and start scaling your HMO property business today. Let's get back to the show.

Andy Graham (03:16.485)

Welcome back. So today I am going to do something a little bit different. I've plucked four conversations from the community, discussions that have been recently had, and I'm going to share them with you here on the show today. The great thing about the community is that there are so many different perspectives on so many different things. And I think that that makes for a really interesting conversation about all sorts of stuff that you and I can benefit from or may impact us as HMO property investors. The first thing I want to discuss today is national insurance on rental income. 

This now is the rumor that the treasury and the economists are looking at the idea of applying NIH to rental income, something that might crop up in the budget later in the year. Now I discussed this on the show recently. I shared my opinions, but Charles Mazza, one of our community members and actually one of my mentees, he raised a question off the back of that press league and it started a discussion in the community. Now let's be really clear. This isn't policy. It's not even a proposal right now. It really is just chatter. And Jeremy Dyer, one of our sort of longstanding community members.

He raised the good point that we've seen this before. Last year, there were similar headlines, similar rumors, and nothing came of it. And Jeremy's opinion was that we don't need to waste too much energy on rumors because most of them never materialize. And you know what? He's absolutely right. You can drive yourself mad worrying about these things, and sometimes they never happen. And I'll admit that the news and these press leaks have been frustrating me recently. And sometimes you do need to just step back and put everything into a box and look at it with some context. 

But the reason that this sparked such a big conversation is because if it did happen, it could have some very real consequences. Now, Ben Lenton, one of our community members, often shares some very insightful experience with the community. He said that, if landlords are suddenly paying more on tax, then it changes the profitability of HMOs and profitability is ultimately what drives what people are willing to pay for properties. So if buyers are paying less, that could well filter through to valuations. And then because the whole point of mortgage valuations is largely determined by certainly the HMO space, the profitability of deals that could have a trickle down effect. Ben did point out that HMOs are often owned in limited companies and it's quite possible that this NI change, if it were to happen, may only apply to personally owned properties. And that is an important piece of detail here. If that was the case, then actually perhaps company buyers would have the edge and therefore they'd be willing to pay a bit more or continue to pay what we currently pay and that may well just prop

Andy Graham (05:40.602)

prices up to some extent. And I liked Ben's take, you know what I liked about it was that wasn't panicking, it was actually quite logical. He’s a person that’s not too worried. And he thinks that yes, while it might put some investors off, it would possibly just reduce competition a little bit and that would turn into a benefit for other remaining investors. So in the long run, he doesn't see it as being too much of an issue. Now on the flip side, a number of our members were not convinced that it would affect valuations at all and didn't think that the application of NI on any income would have anywhere near a big enough effect to actually change the market. And the reality is that NI would probably be tax deductible. So in terms of profitability and the actual net loss, it may not be a huge amount. And I think that is also a very fair point. So is it likely to have enough of an impact to change valuations? Possibly, possibly not.

Is it likely to materially impact profitability? Probably not, in all honesty. But my opinion that I shared on the show last week was that, look it's just another tax. It's another stick that landlords are being beaten with. And that's the narrative that I really don't like at the minute. At the minute, what I feel like is we really need to support landlords, to encourage landlords to continue reinvesting in their properties, to prop up the housing market, the rental market, which we know is in pretty dire straits at the minute.

And it's not just landlords, I think business owners in general just need to hear some positive rhetoric coming out of the government at the minute. And for me, this one is just exactly what we don't need to hear. It's not a pro-growth strategy, it's just another tax. Okay, it might not have catastrophic consequences, but it's certainly not doing anybody any favors at the minute. Yes, it might plug a little bit of this black hole, but is it really going to have the desired effect? I think in reality, it'll probably just push more people away from business and property. And I think that the longer term consequences at least will be that less money washes back into the economy because there's less people willing to try and put the work in to make that money in the first place. 

So look, what's my take on it? Don't panic. I think that that was certainly good advice shared by a number of members. It is just a rumour. It may never happen, but just a little reminder that you probably should stress test your numbers. There's a lot of noise about the autumn budget. We know that there are going to be some tax implications here.

Andy Graham (08:05.324)

Now would be a good time to sense check your portfolio and anything else that you're buying right now. So the second discussion that I want to bring to the table today, and I think that this is absolutely brilliant because I've been investing in HMOs for nearly 20 years now and I myself didn't even know about this. This was a great one on planning. Steve Curtis is one of our members. He shared a strategy that I think a lot of people don't know about. It was really clear from this discussion, from this post in the community that a lot of people really don't know about it because it amassed so many comments and so much engagement. 

What Steve shared with us is that you can use a lawful development certificate, an LDC or a CLUD, to change a six bed into a seven bed without having to go through the full planning process. Now this is actually for a lot of people kind of game changing really, because it can be really difficult to get planning permission for seven bed HMOs. This strategy, as Steve went on to explain, helps really simplify and streamline the process of going from a six to a seven. And for many of us, that is all the difference when it comes to the economics. You are buying a property and the economics are based on that seventh room. It's pretty critical you get the planning for that seventh. However, you've got to be delicate with planning. It is sometimes easier to take a phased approach to your planning rather than just go all in, which can often lead to planning rejections and then getting sent down the roots of appeal and things like that. Then you're sitting on empty properties for a while and it starts to cost an awful lot of money. 

So while none of this is perfect for us, planning is often quite painful. This is a really good strategy. Now the first question that came up from one of our members, Brokis, was do lenders actually recognise this? And Steve said, yeah, they do. You know, one of the main advantages of a lawful development certificate is that it is a formal recognition of the use.

And lenders do see it, which is great. So if you can get this from a planning authority and you don't have to go through the full planning route to get that six to seven change, your lender's okay with it. You've kind of got exactly what you needed. Now, Alex, one of our community members, jumped in and said, hang on, you know, I thought that you had to go through a full planning application to go from six to seven or more. That was sort of the question I think that a lot of people had, and they were surprised by this.

Andy Graham (10:25.952)

And Carrie Ann Wells, who is a planning consultant in the community, she actually explained that this is an approach used quite regularly by people who do know it's a staged development process, not right for every project, but certainly legitimate if it's done properly. And Steve pointed out that another big difference is that with full planning, your neighbors are notified, you know, there's public consultation, counsellors can end up kind of deciding the future of your application, your deal, essentially. And let's be honest, counsellors don't often have

A, much of an understanding and B, much of an incentive to approve these sorts of projects. With an LDC, its different neighbors generally aren't notified and the decision sits with the planning officer. And that then boils down to more of a technical sort of approach. Are you meeting the amenity standards? Are you technically achieving the planning policy that is set out? And if you are, then they'll probably give you that. It just takes a lot of risk out of the politics of the process. And that is so important. 

I thought that was such a good point because politics is such a big part of the planning process. A lot of people would like to think that it isn't. It's a black and white. You either tick the box or you don't, but the reality is, and if you've ever been to a planning committee meeting, it is very political. It is politically charged. I have often found that the committee sit on one side. They're either fairly left or fairly right and very few people like HMOs.

This is a really great strategy if you are potentially applying for something that could be quite contentious where you know a lot of neighbors are going to object. A few more members commented on this post. They shared some experiences and I think it does sound like there's probably some regional differences and that may well be the way that the planning office and the planning department themselves feel about HMOs and certainly larger HMOs, sui generis HMOs. So I wouldn't necessarily take this as carte blanche. It's a strategy you can use and it will work every single time, but I think the general consensus and takeaway from this is that LDCs are a really powerful tool if you use them correctly. They're not a free pass, but you still need to have the correct room sizes, amenity spaces, license and compliance and all of that jazz. But if you've got a council that wants to work with you, then this could be an absolute game changer because you could avoid getting into that planning battle with local objectors and the committee members.

Andy Graham (12:44.18)

Thank you Steve for sharing that. A wonderful contribution to the community. After nearly 20 years, I've learned something new and that is what I love about our community so much. What a fantastic piece of experience and advice to share. 

Quick one. I think that you'd agree that finding and doing deals is the most important part of property, but it's everything around the deal that can slow you down. Keeping track of rental income and refurb costs, paying contractors and bookkeeping. That's the stuff that needs time and energy that you should be putting into your deals. That's why I'm glad Tide are sponsoring today's episode. Tide is more than just an online bank. It's your all-in-one toolkit for running a property business. You can open a free business account in a day, send invoices, accept payments and track expenses automatically, and even give contractors or your team members their own cards with limits. Property is complex, but your finances don't have to be. You can sign up to Tide today with my link in the show notes and get £50 cashback when you spend £100 on your new card. Let's get back to the show.

The third discussion I want to surface today, bring to the table, is a conversation that was started by Julia in the community. And there's long lines of, I suppose we're staying on the topic of valuations here, but she's heard from her brokers recently that revaluations are perhaps coming in a bit lower than they have been doing more recently. And she wants to know if that matched other people's recent experiences. And understandably, a lot of people had some interesting experience and opinions to share with this.

Now Jason, one of our community members who does a lot in Hull in particular, he said, know, evaluations are right. So they're a bit of a black art. And that is absolutely true. I completely agree with that. They've always been a bit all over the place, Jason said, and he's found the biggest problem is that landlords have unrealistic expectations. And I have to admit that I think that there is a definite truth to that. There are genuine down valuations, perhaps misinterpretations of how to value HMOs, sometimes inexperienced value or sometimes value who are coming to value HMOs, but they are not commercially orientated. They are perhaps just ticking a box for a lender because they are on a panel or something like that. That can be problematic, but then there are definitely times when investors like us, we have very high expectations. We are very optimistic. Emotionally, it's quite important for us to get that high valuation and we have probably overvalued it ourselves when that value comes in.

Andy Graham (15:02.288)

It doesn't meet our expectations. We say that it's a down valuation and there is also reasonably a question to sort of ask. And it was really a down valuation or were our expectations just a little bit too high? Now, Ellie, who you know very well, our expert broker here at the podcast and the, you know, inside the community and the roadmap. Ellie, as viewers that lenders are definitely asking for more evidence now. Valuers really do have to substantiate everything. Yields, comparable rents, they can't just give you the best case numbers because that's what you put down on the sheet. It has to be justified. She gave a great example actually, and it was a client that's got two valuations on the same HMO from the same valuer just a couple of months apart. And the independent report from the client came in at 370,000 and the lender's valuation for the same property came in at 340,000.

That you really should take on board because that highlights just how much disparity can genuinely exist. And that is quite simply boiled down to where the instruction came from, lender's instruction or private instruction. So just keep it in mind, there are and can be fairly big discrepancies. So if you do get what you believe is a genuine down valuation, step back, have a good chat with your broker and come up with a plan of action and...

Think about whether or not you can tackle it from a slightly different angle, maybe go through a different lender or a different evaluator. Julia said that this thread was really helpful for her because her worry had been that when fixed rates end for her in a couple of months on this particular property, she won't be able to release the equity that she'd really hoped for. It's part of an important financial planning exercise and Ellie agreed that in some cases, yeah, they are coming in a little bit lower and there's absolutely no guarantee. But my opinion was that if you prepare some information, you provide a pack of what you've done with the property, where rents currently are, exactly what you're paying on bills, maybe some of the comparables locally. That can be a helpful tool.

I don't think it's going to be enough to almost dictate what the value it gives you. I've never, ever believed that that will be the case, but just kind of giving some helpful information and a bit of a helpful steer, I think can sometimes persuade the value in your direction. So that was sort of my addition to this, but I thought that was a really useful conversation.

Andy Graham (17:15.316)

because what it highlighted was that yes, there are definitely some discrepancies across the country, across the different types of HMOs, across different types of lenders, across even the same valuers, and it is something that can affect all of us. So don't be surprised if this is you, be aware that it is something that can happen. Try and prepare for it as much as possible. And honestly, try and manage your own expectations. If your expectations are super high, then you are probably going to be disappointed. And that is just a really honest truth. And I think that that kind of boiled to the surface in this conversation.

Fourth and final discussion I want to bring to you today is a little bit different, perhaps not as sort of seen as being as important as conversations around tax and profitability and valuations, but this got so much interest and some really, really, really useful comments were sort of added to this thread. And I thought it just made a really good example of how differently we can all look at our projects. So this is quite a practical question that was raised in the community and about, it was about how we furnish our HMOs.

Christine shared a picture of a wall-mounted desk that she was thinking about using in a bedroom with one of her professional HMOs. And it sparked a really lively debate actually, quite surprisingly so. The question was sort of look to the effect of what do people think about these wall-mounted desks? And it's sort of a fold down desk, kind of a small desk solution, our desk needed. That was sort of the idea behind Christine's post. And a lot of people chimed in. Damian said that he liked the look of it. And actually I'll agree.

I know you guys can't see this right now, but I did like the look of it. It was compact. It looked very aesthetic. I think it could look great with the rest of the room designed around it. They immediately raised the point. And I think a lot of people immediately thought this when they see this kind of a desk solution. What is the quality like? If the desk itself and the wall you're fixing it to, if they are sturdy, if they're robust, then yeah, great. It could work well. But I think we've all seen these sorts of cheap fall down solutions that are just a bit naff.

And tenants probably hate and they end up breaking and it just becomes a problem for you as a landlord to deal with. And he also pointed out that at the end of the day, it's your target market that really matters. It's not actually you and I and landlords and investors, students and young professionals and families. They all use rooms differently. And that was just such a great point to be reminded of. And that's actually not just the case when it comes to desks. It's the same when it comes to beds, space, en suites, shelving, storage, design.

Andy Graham (19:39.314)

All that, even just simple things like blackout blinds can make all the difference, but some tenants really don't care like students often don't. So I thought that was a really good point to make. And Christine explained that she actually rents to young professionals. A few of her tenants have specifically asked for desks and more of them are now working from home, even if it's just a couple of days a week. So having that desk space is useful. Now, a number of people added to this thread and said they don't really get the obsession with desks in professional HMOs. 

She feels that they're more of a student thing. And Jude, one of our community members said that actually many of her HMOs are student-lets and in that market desks are essential, but she has professional HMOs as well and none of them are used. She doesn't have desks in any of her professional HMOs and it's not a problem. Julia Maurice, who is regularly sharing his insights and has a real interest in sort of in design, has said quite bluntly, so they're lucky. Again, it doesn't matter what we think, it matters what your customer thinks. Again, really great point. 

Put yourself in their shoes. You might want to do some work, but you might also want to put some makeup on. You might even want to eat a meal in your room. And I think just that useful reminder of practically speaking, how important a desk can be to a number of people. Personally, I would want a desk. I probably want the biggest desk in the world though. Desks can take up lot of space. That can, as soon as you walk into a room in that space, it can immediately make it feel quite small, a bit cluttered. And I think you've got to find that balance. 

So, my interpretation of this is that desks, generally speaking, I think are a pro. I think where you've got small spaces, you have to look at the pros and cons of adding a desk that takes up quite useful and important circulation space in a bedroom. And so you probably do want to prioritize a smaller desk over a larger desk. A solution like a fold-down desk, as long as it's sturdy and robust, like a number of people have said, could be a really good solution. I think it could look really good. I think it could work really, really well.

But you just need to be mindful that that might not be suitable in a larger bedroom, maybe for students who spend a lot of time at their desk studying. And some people just have a personal preference. They want a big desk. They want to fill it and cluster it with loads and loads of stuff. So remember it's important that tenants do need stuff to put stuff on. If all you've got is a chest of drawers and a bed and a wardrobe. They've got personal belongings and possessions.

Andy Graham (21:59.05)

They might want to put picture frames down and things like that. So just think quite practically. Have a think about your room, your space. I think the summary to this is that there's no one size fits all. It really depends on the space. It really depends on your tenant type as well. So I felt that that was a really useful conversation and plenty that we could all take away from. So there we go. Look for really good discussions from inside the community. I thought they were great because there were so many different perspectives. Like I said, really rich in different insights and value. 

And I on rental income, probably just noise, but like a reminder, maybe now is just a good time to stress test your deals and understand your valuations and your numbers. There's a lot of discussion at the minute that isn't likely to be that positive for us as landlords. So just keep an eye on your numbers. Secondly, LDCs, a planning tool to unlock the ability to get you from six to seven, could really streamline things, help you sidestep the worst bit of planning. Fantastic bit of advice. Thank you for sharing that with us.

The third was about valuations in practice. Are they coming in lower? Well, yes, possibly that there are ways to maybe try and mitigate that, but you might need to manage your expectations. And there are possibly solutions if you do get a down valuation to try and get it again, okay, revalued at where you want. And finally, design HMOs, small design choices. They really can make a big difference to your property and to your tenants. And that all boils down to at the end of the day, profitability.

For me, these conversations are the real value inside our community. You don't just get the answers, you get the perspective and the debate, and sometimes you even learn new things that can change the way you do business. So look, if you haven't already joined, come and check out the community. It is our free group on Facebook, the HMO community. Go and check it out. Well over 10,000 members now and just a fantastic place. And this is a fraction. I mean, I've picked four conversations from the last week or 10 days, and there were many, many, many, many more and thousands and thousands of comments.

Thank you to all of our members who do contribute so regularly in the community. It's you guys that make it so valuable. And I really value all of your advice, experience and insights that you share. 

That is about it for today's episode guys. Don't forget that we have a huge 20 % sale off at the HMO roadmap now. Head over to theHMOroadmap.co.uk now and take advantage of everything that we've got to offer you inside. If you join on a premium subscription, that means you get literally everything. Every single one of my downloadable

Andy Graham (24:21.406)

templates, all my tools, resources, over 70 case studies from community members. We've got the full 60 lesson video walking you through the process of how to find deals, how to fund them, including how to raise private finance, how to fix and refurbish them, how to fill them with great tenants, and then how to get into the flow of managing them profitably. We've got dozens and dozens of expert master classes on all sorts of subjects, including commercial valuations, including how to raise private finance, including interior design, including planning permission. 

Honestly, it is an absolute game changer if you want to scale up your HMO property business, but you want to do it faster. You want to find a more economic way to do it. I promise you it is an absolute game changer. We are by a long way the largest vault of training and education and resource when it comes to HMO property investment anywhere in the world. And it'll cost you less than the price of a cup of coffee every single day. That is it guys. Thank you for tuning in and don't forget that I'll be right back here in the very same place next week. So please join me then for another installment of the HMO Podcast.