When it comes to selling an HMO, we are experts in providing HMO valuations. With years of experience, we know how to value your property appropriately, while ensuring you get the best possible value for your HMO. At The Property Advantage, we have a tried and tested approach to valuing all different types of HMO property, including student HMO valuations, commercial HMO valuations, and more.
Lots of our landlords, buyers, investors and partners have an interest in how we value our HMOs and what factors and decisions play a role in our final price recommendation and property value. Keep reading to find out more about our TPA process…
When valuing a HMO it’s important to understand the multitude of factors at play. All the factors we take into consideration help lead us to the final price, and ensure that we’re pricing your HMO accurately and fairly and with the right investor in mind.
Location and Gross Yield
The easiest way to get a ballpark estimate of a property’s value is to initially use a ‘broad-brush’ method, considering sales of similar properties within the region and postcode to understand how the location has an effect on the value. Understanding the amount of yield that area commands helps to inform our HMO valuation process.
Fine-Tuning The Valuation
Once we’ve established the expected gross yield of an average property within the area, we look at the details more specific to the property and the different variables that can have an effect on value. Such as the tenant demographic, proximity to necessities, the demographic of the targeted tenant, the viability of the rent, and more.
The proximity of the property to key necessities and what exists in the surrounding area will have a huge effect on the HMO valuation. The attractiveness of the HMO is affected by local shops, travel routes, parks, employment opportunities and the tenant type.
We carry out an inspection of the surrounding areas to identify what sits in the immediate vicinity and how that may affect the value.
Tenant demographic is key when valuing an HMO, as the demand from the market is what ultimately drives the price. It’s important to take into consideration the tenant type of a given HMO to ensure that the property is priced at the correct level, with an opportunity for a good return on investment.
We also have to consider the general demand for property in a given area. For example, if the HMO is situated in a densely populated student area, then there may be an effect on the room rates available. It is important to remember factors such as tenant demographic, wear and tear and level of maintenance required.
These factors all play a part in the financial viability of the property, and subsequently its value.
The demographic of the area also plays an important role in the viability of the room rate per tenant. Properties in London typically attract a very high quality professional house-sharer hence room rates are highest here in the UK. These HMOs are likely to be all en-suite, super deluxe and primed for modern living. Cities like Bath, Bristol and latterly Birmingham and Manchester are not dissimilar although bricks & mortar values in these cities differ hugely.
For a property to be of interest to an investor, it needs to provide a substantial return on investment or yield and often the propensity for some capital gain. Once all factors have been considered, we can determine what value to accord to the HMO.
It’s important that the return on investment we propose is feasible and that an investor won’t struggle to find tenants, or retain existing tenants. This maximises yield.
Property Condition and Bricks and Mortar Value
The general build quality and size of the HMO is central to the TPA HMO valuation process. Understanding the condition of the property will inform what level of repair work is required, and what the anticipated annual maintenance bill may be.
As well as all the other previously-stated factors, we need to understand the intrinsic ‘base’ value of the property. This is often referred to as the ‘bricks & mortar’ value and is most likely indicated by the value of the property itself within the local postcode. Understanding the ‘bricks and mortar value’ can help us further assess the potential yield, and therefore the HMO’s market value.