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I have owned a 7 bedroomed HMO in Liverpool for 10 years and last year I was granted a selective License from Liverpool Council.
I have a Commercial mortgage on the house, it is very well maintained and great housemates.
However I am thinking of selling the house and venturing into other areas of housing.
I am unsure of where to get a proper valuation as not many estate agents know how to value it.
Has anyone any knowledge in this area please?
Many thanks in advance
Hi Pandagirl,At the end of the day, any property is only worth what someone is willing to pay for it.There are two methods of valuing HMOs.1. The bricks and mortar valuation based on local comparables.2. A commercial valuation based on the rental income, using a multiplier.Different lenders value HMOs in different ways, so a lot will depend on who the buyer's lender is and if they are using finance. If you are selling to an owner occupier, it will be a bricks and mortar valuation. If you are selling to another investor, you may be able to get a commercial valuation, but the investor will probably be looking for a discount.If it is a cash buyer, then they will also be looking for a significant discount.A local RICS surveyor should be able to advise you on how to price it, but there may not be much of a market for it through local estate agent channels. You may need to consider another channel such as selling via an auction.Give some thought as to who might buy the property and that will determine how you price it and market it.See - HMO mortgages and valuations with Stephen Johnson, M.D. of Shawbrook Bank Shawbrook works on formula for HMO valuations Progressive Property/HMO Daddy - HMO Commercial property valuations
Hi Vanessa, many thanks for your reply.
I am really only interested in selling the house as a HMO and not as a family home.
It is all set up with professional housemates all handpicked so they all get along together.
If I do find a buyer at the right price it is all up and running as a business and will run amazing providing in the future
they also put in the right housemates. Personally over 10 years I have never had a non paying or troublesome housemate.
I will get in touch with the RICS surveyor as you advised.
I was thinking of privately marketing the property myself due to the fact of the local estate agents not having the experience with HMO properties.
Many thanks again Pandagirl
A RICS valuer will be able to give you a valuation for the property. I know the Liverpool market reasonably well and HMO type properties are very common in the City. Investors purchasing HMO will tend to buy at auction as the property will be guided / reserved at a lower level than through an agent.
It is almost certain that you will achieve a higher sale price selling your property as an income generating HMO, than a large family house that needs to be converted back.
As a general rule, Liverpool, like many areas in the Northwest, tends to have high yield but low capital appreciation. Therefore, an investor will want to see a gross yield in the region of 15% for a HMO type investment.
I would suggest that if you work your figures on a 15% gross investor yield, you won't be far out from what the property would be purchased for.
If you look to sell through auction, I've bought & sold through both Venmores & Sutton Kersh and they were good to deal with.
Hope this helps.
Universal Property Services Ltd
Quality Construction & Development
Hi thank you also for your reply, I would be interested in your valuation of the house
I am only going to sell it as a HMO as it is a great house for this purpose and also for housemates.
To give my estimate of value for your HMO, I would need to know what gross rental you receive and then work back from there.
Also, what type of tenants you have in situ? Students, working professional, DSS?
The type of tenancy agreement is important as well, does each room have it's own AST?
I am surprised that you have not been able to get a valuation from agents in Liverpool as most would definitely have come across this type of investment for sale.
Deduct 7k from the annual income and divided by 11%, you shouldn't be to far out, just as an indicator. However it is unlikely any buyer will pay it. Its cheaper to buy a vanilla property and convert yourself.
You can expect somewhere near the residential value (bricks and mortar) + the cost of the conversion.
Would that formula apply in Article 4 area Arran?
In my experience it doesn't as it's impossible to convert a standard house into a new HMO.
my area is an article 4 area. It means the council apply a threshold usually 10% to 20% to the number of HMOs within an area usually 50 to 100 meters from the property.
We are looking at purchasing HMO's in the liverpool area - if you are looking at disposing off your asset do get in touch.
Thanks for your interest Sam, I have just tried to send a pm but apparently I am on a probationary period for this site