Selling a tenanted HMO in the current market
UK buyers currently attempting to lend money to fund HMO purchases are finding the rates and stress-testing very difficult. They’re creating quite a large barrier for somebody just trying to buy the average-sized HMO.
So, with so many hoops for buyers to jump through, how are you meant to sell a tenanted HMO in the current market? Continue reading our helpful guide to find out!
Steps to sell an HMO with existing tenants
Here are some steps you can take to increase your chances of selling a tenanted HMO:
- Lending quagmire
- Make your HMO appealing
- Creative ways to push the sale
- Optimise your HMO
Lending quagmire
When looking to sell a tenanted HMO, think about who isn’t in the ‘lending quagmire’ and if your HMO appeals to them. This could predominantly be overseas buyers and cash buyers. But, beware and advance with caution with a strict POF and vetting process. Also, expect lowball offers from cash buyers who know the value of their position.
Make your HMO appealing
You must make sure your HMO appeals to buyers in the price bracket above individual transactions. Can you bolt onto an existing portfolio transaction or group together with other HMOs to increase the transaction size?
A word of caution from TPA: you’re likely to be a small fish in a large pond but you will likely get ‘yesterday’s’ higher HMO value as a result.
Creative ways to push the sale
When looking to sell an HMO with existing tenants, think about the creative ways in which you can make the sale work for your target buyer type. Do they need a cash-back incentive, delayed completion, or a 12-month option that works for both parties? At the end of the day, this is a deal and not a family home purchase. There are many ways to overcome the difficult sales market for both parties if you come together to negotiate.
Optimise your HMO
To sell a tenanted HMO, you’ll need to optimise it first. Make sure your HMO property is run efficiently, that rents are optimised, that the tenants are looked after and happy, that the management is high-quality, and that the property is compliant.
All of these aspects, and more, will increase saleability and net returns which is important in the current market. Force your HMO to the top of the buyer’s queue, especially when that queue has shrunk slightly.
If you can’t do these four points and your HMO only really appeals to UK investors, you’re best holding off on a sale for now. It will only upset your tenants. So wait for when the market is right for you.
How NOT to sell a tenanted HMO
Now you’ve seen the must-dos, here are the must-not-dos of selling a tenanted HMO:
- List it unprepared
- Expect the price to increase with a rent roll
List it unprepared
The first thing you absolutely must NOT do when trying to sell a tenanted HMO is list it unprepared on a website like RightMove. Without proper consideration and unaware that most buyers scouring that website can’t afford to buy what you’re selling, your listing won’t perform well.
Similar to the above point. Do not use Facebook to flog your HMO. Your cash buyer may well be here but they will be low-balling you.
Expect the price to increase with a rent roll
Don’t expect the price of your HMO to rise just because your rent roll is. In most cases, this offers mitigation over the increased lending and running costs and not the uplift in value gross that rent increases would usually be associated with.
Selling a tenanted HMO with The Property Advantage
As specialist HMO sales brokers with several hundred HMOs at various stages of the sales process in the current market, we know that recent months have been challenging. Trust us, though, when we say that there are buyers out there and we’ve employed all of the above aspects to our stock, and are already seeing the results.
At TPA, we can still sell HMOs with existing tenants on volume, but the landscape has changed. Our final piece of advice for you is that you must be extra diligent about who you let view your HMO, and who you accept offers from.
You will probably feel the urge to be more lenient with viewing requests from buyers who you have a gut feeling won’t perform. In a strong market, they wouldn’t usually get a look in, so don’t be tempted to let them have one now.
They aren’t your right buyer now just like they weren’t your right buyer three months ago. Wasting valuable access requests on people who will waste your time will alienate your relationship with the tenants and upset them.
For more about selling HMOs, you can get in touch with our experienced team on 01743 612 018 or email us at info@thepropertyadvantage.co.uk.
