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I am struggling to value a furnished property.
The rent is higher because it is furnished. This reflects o. the yield. Do you adjust the yield to non-furnished level and get your calculations that way? Or do you go down the commercial route valuation like a HMO and work it out that way?
It is a multi-unit property. All self-contained units. 6 flats.
Bricks and mortar value plus a little extra for second hand furniture I would suggest
Manchester based investor. I buy, sell, renovate and rent investment property in East/North Manchester email: firstname.lastname@example.org Call: 0161 681 3724
But the landlord is arguing that the yield is very healthy to justify the commercial valuation of the asking price
I was going to say adjust yield to non-furnished level as the reality of it is the furniture will have minimal second hand value.
It is more about calculating the yield against the aski g price. Furniture seems to adjust the yield up by around 10%
Are the items things you will use? If a tennant furnishes a property they are responsible for any items which break down, if you provide furnished it is your responsibility to replace them (my understanding but I'm willing to be corrected)
White goods - would you be better buying new (energy efficient, gaurenteed) items? Furniture - is it clean and marked as fire resistant? carpets - are they good or do they need a clean? Some tennants do not want a used bed.
My circumstances are different, I always give sellers the option to leave anything they don't want (but I specifiy they remove any "problem" items I see when I view - the last property had a reinforced commercial "bank" safe blocking the garage that they had to remove), sometimes I get useful items I can use or rehome, sometimes I get junk. Normally it's a mix.
Edit : for value, I normally expect carpets, curtains fitted cookers to be included in the price, additional items add very little value for me as used furniture can be found cheaply and I can choose what suits me.
The extra sofa, wardrobe and a bed are pushing the rent up by 10%. This is making the vendor beoieve a higher asking price is justified due to the proven rental income.
Is it foolish to treat it as HMO, valuation wise?
Thank you all.It is currently tenanted. All items are being used.
The rental income is inflated by around 10% for it being furnished when you compre to non-furnished flats.This makes the yield to seem 10% higher on paper but it is still being received in the landlords bank account.Higher yield might be causing the asking price to be higher.
Just also be aware if your looking to purchase with a mortgage, as has been discussed on PT before very few lenders will give commercial valuations on HMO's.
I’m not sure how much I can add, but if I understand correctly, the Vendor has valued his Property based on the current Yield which as you say is around 10% above the usual due to it being furnished.
Whilst this may appear to be a good investment, I would suggest you consider the Bricks and Mortar Value as many Lenders may not provide a Valuation based on Rental Income.
Are you able to confirm what you think the Property might be worth if simply sold as a vacant building, and how does this compare to the Price sought by the Vendor. Assuming you would need to get A Mortgage to purchase the Property, will the Lender’s Valuation meet requirements.
If you’re intention is to buy without a Mortgage, I guess the Value you put on the Property could be influenced by the current Rental Income, but their may be Voids and Repais in the future, so I would suggest taking the Bricks and Mortar Value as the best starting point and then adding an amount you’re comfortable with for the fact that the work has been done to convert into an HMO and that there will be Tenants in situ at the Time of purchase.
If able, please can you advise on the Bricks & Mortar Value versus the Price sought by the Vendor, as well as your Valuation based on what you believe should be a “Fairer” Price ?