Selling tenanted properties

Selling tenanted properties

Will my tenants get upset when they find out I’m selling?
Selling landlord’s concerns about selling their tenanted HMOs...



Location: Shrewsbury, UK

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Why do people sell their HMOs?

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  “Why are they selling their HMO if it cash flows so well?” We get asked this a lot by potential investors (usually first time investors). Answer usually goes something like this; Landlords sell for all types of reasons but usually one of the following: • Fall out with business partner • Divorce • Change of strategy (moving into development common) • “I prefer BTLs” • Can’t make the HMO work (means too tired and worn out as a self-managing landlord or has chosen a crap managing agent) • Need money for other ventures • Retirement • Made money on the refurb and now selling for a yield price to make a profit (flip) • Was overpromised a ‘commercial valuation’ by the sourcer who sold it to them pre-refurb • Had a ‘good stint’ as an HMO landlord, build a good portfolio and now it’s time to sell Like anything, the above reasons are 50% positive and 50% negative so it’s about mitigating your risks and making sure that your exit is on YOUR TERMS and not forced upon you if and when you do s...
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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 pla...
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