HMO Values - do they go up or down?


Will your HMO go up or down in value over time?

There are various ways that an HMO can increase in value...

• Rents go up in the area due to demand increase (could be an expanding Uni, a large factory or employment coming to town etc). If the HMO was originally valued on the income then it will ‘go up’ in price.

• Article 4 coming in or some other factor that means the local gross yield sale/value expectation goes down - this will push up values.

• Standard bricks and mortar increase if the HMO was bought in the South or to a price comparative to B&M - hard to get ‘up north’

• If the tenant type changes or becomes more ‘investable’ - you can sell an HMO for more with a 10 year FRI a lease than you will get for the same HMO with poor occupancy and a tough tenant group etc

But

What goes up can also come down, and we see these factors equally as commonly

• Having the HMO commercially valued upon refurb and based on high rents because the HMO is new. Fast forward 3-5 years when the place is worn and the rents have regressed as a result and the value goes down. Some people who over leverage get stuck in the mud!

• Over saturation or having an HMO that isn’t current with the latest amenities and standards etc - non article 4 area HMO gold rush type thing where there’s only so many tenants to go round...

• Having a ‘bad’ long lease - like a poorly run supported living lease, a R2R contract, a lower rent ‘guaranteed’ lease etc

• not maintaining or looking after the house or the tenants

The status quo in HMO values means ongoing upkeep, management, repairs and happy tenants.

 

Location: Shrewsbury, UK

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