By Chris Noble, Director, Garness Jones
When it comes to property, Houses in Multiple Occupation (HMOs) can offer an excellent investment – offering greater rent per property, and better cash flow compared to a standard buy-to-lets.
HMOs in cities and towns close to universities, hospitals and areas with strong employment hubs of young professionals, can be particularly lucrative when managed effectively.
Indeed, across Yorkshire and Lincolnshire, investment in the right HMO properties at this time could offer yields of around 7-8% in York, 13-14% in Hull, and as high as 18-20% in Grimsby, so it’s an area of opportunity not to shy away from.
Expert HMO valuation required
For any investor considering buying an HMO, it is imperative that they insist on a valuation from chartered surveyors with experience in this specialist sector.
HMOs sit somewhere between a residential property and a small commercial investment – and rarely are there two exactly the same.
This means there are few truly comparable property sales to base valuations on, and as valuations are based not just on bricks and mortar, but also on the potential rental income (yield) – it can be a challenging process, and one where valuations are all too often over-inflated.
Factors including achievable rents per room, expected occupancy rates and running costs all have to be factored into the equation – and be realistic - as do factors around licensing and planning which could impact on buyer.
Valuations to RICS ‘Red Book’ guidelines
Values of HMOs are very sensitive to market sentiment, and the many factors of uncertainty can make some chartered surveyors nervous about putting their name to a valuation.
This is not the case at Garness Jones, as our team, which includes four VAS Panel members, has extensive experience in this area.
Our team follows Royal Institution of Chartered Surveyors (RICS) ‘Red Book’ guidelines, which demands its valuation standards be rigorously followed on more complex property assets such as HMOs.
It means our HMO valuation reports are fully evidenced with all available comparable sales and rental data, with full disclosure of any assumptions around occupancy levels, rents and limitations.
We ensure we cover all legal regulatory compliance issues such as licensing requirements, planning permission, usage and fire safety compliance, outlining any risks specific to the property in a clear and understandable manner, explaining how the valuation was reached.
When it comes to HMO valuations, we pride ourselves at Garness Jones in cutting the confusion and bringing clarity to sellers, buyers and lenders.
For support with HMO valuations, contact Director Chris Noble on 07525 591999 or email christopher.noble@garnessjones.co.uk
