Sell HMO Property Portfolio

LOOKING TO SELL AN HMO PROPERTY PORTFOLIO?

If you’re looking to sell HMO property portfolio, then there are a number of factors you need to consider to enable you to extract the maximum value out of the HMO portfolio in any given market.

Most portfolio landlords that own HMOs, have acquired them over many years and thus typically the properties are all in different conditions.

The page lays out the options and also gives some ideas of what to expect when looking to sell an HMO property portfolio.

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If you’re looking to get started selling your HMO property portfolio and would like a free valuation of some professional advice choosing the best route forwards then call us directly on 0203 970 4112
 or just press the button to get started.

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HMO PORTFOLIO VALUATIONS

When looking to sell an HMO property portfolio, the best method is to value all HMOs individually first, then collectively. This is the methodology which stands up well to due diligence from both portfolio, and individual HMO buyers.

This method allows HMO landlords to then make the best decision on whether to combine them as a portfolio or to sell them off individually, depending on their personal circumstance.

The break up value may be different to the combined value, and thus may or may not be worth the additional effort of selling the HMOs off individually.

HMO valuations are subjective, not definitive, and everyone has their own opinion. Your accountant, your long lost aunt, the guy down the pub. None of these opinions matter.

Ultimately, the only relevant opinions on price are;

If all 3 of those parties manage to conclude then a successful transaction can take place.

Note: The role of the agent is to introduce suitably qualified potential buyers and then squeeze every possible ounce of value out of their offers. It is NOT to accurately predict the price. Valuation ranges on HMOs can be broad due to the lack of direct comparables.

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FACTORS AFFECTING HMO PORTFOLIO VALUATION

HMO valuations are di ffi cult. D ue to the lack of direct and local comparable properties , simply as a result of HMOs representing a small proportion of the property transaction in the U K .

A few factors that impact HMO property valuations.

1.  Availability of comparable sold HMO properties

A ) Whilst HMO comparables are harder to find if there is evidence of recent, similar, local properties selling, then this is the best evidence to guide valuation.

B ) Surveyors / Valuers are not HMO speci fi c. Out of every 100 properties that any given surveyor might value per year, on average only 1-5 of these are likely to be HMOs, which is a fair representation of the market. The consequence is that they fi nd them harder to value, and so often are conservative in their approach.

2.  Planning permission use class.

Compliant HMOs should have the correct planning documentation / use class.

I. If between 3 and 6 units of accommodation, an HMO should have a C 4 planning certificate.

II. If 7 units of accommodation or above, an HMO should hold a Sui Generis planning certificate.

3.  Property size ( s q ft ) & no of bedrooms / units

Good si z e rental units are more favourably viewed as long term rental options by surveyors as they understand that smaller units tend to lead to higher tenant turnover, and thus increased maintenance and voids.

4.  Presence of an article 4 directive

Article 4 directives restrict the ease with which new HMOs can be created and thus sometimes can lead to an increased investor demand for existing HMOs with the correct use class ( C 4 or Sui Generis).

5.  Location

W ell located HMOs with a good proximity to local amenities and transport links in population, education or employment centres are favourable.

6.  Condition

A ) As with single dwellings, HMOs properties that are newly refurbished or developed can expect to achieve the highest sale value.

B ) Good vs Bad.

Tip: Understand and use all factors available that may affect HMO property portfolio valuation and optimise to enable max value to be extracted from any potential buyer.

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TYPE & NUMBER of buyers for HMO portfolios

There are a few different types of buyers for HMO portfolios, the main ones being property funds, and private HMO investors and there are pros and cons of both types.

Private investors tend to be mortgage buyers and so tend to take longer to transact. They normally require structural surveys & HMO mortgage valuations to take place. Depending on the size of the portfolio this can take anywhere from 3 months to 12 months.

Property funds are normally cash buyers and so don’t take as long to transact typically. They normally require structural surveys, but done require HMO mortgage valuations to take place.

Depending on your target timeframe will allow you to choose your pricing in order to attract one or other type of buyer.

Tip: Understand the number & types buyers in this market and then price accordingly.

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HMO portfolio sale timeframe

HMO portfolio sale transaction times really can vary depending on the size and complexity of the portfolio but it goes without saying that, as expected, the larger & more complex the portfolio, the longer the transaction time.

There are 2 timeframes to be aware; sale agreed time frame, and transaction timeframe.

Both of these timeframes need to be taken in to account separately and together. Understanding the process is a key element to making good decisions when it comes to selling an HMO property portfolio.

Also, considering all the moving parts associated with HMO portfolio transactions, what’s important is having someone to manage the process from start to finish. Sales progession can be a valuable tool, and is best left to the professsionals.

It normally costs, circa £500 per property, payable on completion only, which means if the HMO property doesnt transact, there is no charge.

Example HMO Portfolio Sale Timeframe

Tip: Nominate a target sale agreed time frame, and also a target total transaction time. If priced correctly, representing fair value for a purchaser, a portfolio should go sale agreed within 56 days.

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HMO portfolio sale pricing

Price & speed are highly correlated. If higher the speed and certainty is required, then a lower price could be achieved. If lower the speed and certainty is required, then a higher price could be achieved.

When looking to price a HMO portfolio for sale, take professional advice to get an idea of the current market conditions and more importantly the availability of willing and able HMO portfolio buyers to actually be able to complete a transaction.

Local agents typically sell 99% single dwellings and thus don’t have access to large fund buyers or HMO specific portfolio buyers so best choose a dedicated investment agent.

Tip: Price your HMO property portfolio, making it attractive to encourage potential buyers to be incentivised to work towards your target time frame.

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HMO portfolio preparation & presentation

We have seen HMO portfolios come to us in all different shapes, sizes and conditions, and having sold over 500 HMOs now in 8 or so years we know what helps make a successful transaction.

If looking to sell an HMO property portfolio at maximum potential value, a structured organised process is recommended. This can take some time upfront but in the long run it tends to pay dividends with less headaches and a smoother transaction.

Preparation & Presentation

  1. Refurbish everything & get the HMOs photographed just after refurbishment.
  2. Collect all details and present them in such a way that allows for total
    transparency.
  3. Get your documents together in a pack for each property;
    • HMO licence
    • HMO planning certificate
    • Floor plan
    • Building regulations certificate
    • Tenancy agreements
    • Fire risk assessments
    • Fire alarm certificate
    • Electrical safety certificate
    • RICS valuation document (if available).

Tip: Get max value by refurbishment, and collecting the full document suite prior to marketing.

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Examples of Sold HMO Portfolios

Some examples of our experience selling HMO portfolios in the last few years.

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FAQs

Sell HMO Property FAQ

  • How does the process work?
    We operate a regular property agency model, where we work for you to maximise the potential value of your HMO in todays market. We gather all the data, conduct a valuation, put the property to market and get it sold. Simple.
  • Is selling an HMO complicated?
    Yes. HMOs have many more moving parts when compared to single dwellings (normal properties). Our mission is to simplify the process by breaking everything down and giving you maximum transparency along the way.
  • How quickly I am likely to sell?
    If the property is priced correctly it should get a sale agreed within 28-56 days of going to market. It has been as quick as 7 days, but also sometimes things do take longer. With the correct pricing 28 days is very possible.
  • Once I have a sale agreed, how fast will the transaction be?
    HMOs have more complexity associated with them. HMO licensing, planning, management, fire safety etc so they typically have more legal work associated with them and can take a bit long. With cash purchases, the average time to go through conveyancing is approx 6 weeks start to finish, but does vary depending on complexity. With mortgage purchases the additional element to factor in is the valuation, which can take from 2 to 6 weeks depending on the availability of a surveyor.
  • Are there any upfront costs?
    No, there are £ZERO upfront costs. Like any normal agent, we only get paid once you are sold and completed.
  • What are the benefits of using an HMO specialist?
    The main benefit is that you will have 100% HMO expertise from start to finish from a specialist HMO sales company that has handled over 450 HMO transactions in the last 10 years. Check out the benefits section to see them in detail.
  • Is there a contract?
    Yes we have a standard agency agreement template which has an intial period of 16 weeks. It details what your expectations are of us, and ours of you, and it makes doing business clean, simple & enjoyable for both parties. Feel free to contact us for a copy.
  • What happens if the property doesnt sell?
    If the property doesnt sell then you pay £ZERO and you are free to move on and forwards in whichever way you like.
  • How do you value or price the property?
    We have 10 years experience pricing HMOs to get them sold, but normally we are led by owner. We can give you our indications but the choice is up to you. Vendors often know more about the local market conditions than we do.
  • Where do you advertise?
    We advertise to our membership base of over 5,000 active HMO investors. We also have access to all the major property portals including rightmove, zoopla, primelocation and many more.
  • How are you different from a traditional estate agent?
    We are both different and similar to local agents. 90% of local agents HMO transactions are unsuccessfull because they dont understand HMOs properly. 90% of our HMO transactions are successful because we have intimate knowledge of HMO properties and the HMO sales process. Feel free to compare the differences here.
  • Is there a fast cash purchase option?
    Yes we have excellent relationships with professional property buying companies and cash only funds. This solution is really for people who really need speed and certainty. In exchange the price you will be offered will be less than what you will be able to achieve on the open market. We will help you manage this process to ensure you get what is promised.
  • Any other tips on what to expect?
    Yes there are plently and we have seen in all in our 10 years of selling HMOs. Our friends over at HMOhub have put together this handy guide to help you understand the process further.
  • What documents will I need to prepare?
    Any good quality buyer will want to see most of the following so best get your documents ready as soon as you can. HMO Floor Plan, Building Regulation Certificate, HMO Planning Documentation Fire Alarm Certificate HMO Licence Certificate Electrical Safety Certificate RICS Valuation (if available) High-Resolution Marketing Photos Rental Schedule Management Contract (if using a management agent)
  • How do i get started?
    Simply fill out the form on this page and book in for a discovery call with us to see how we can help you.

SUMMARY

Lots of things to consider when selling an HMO portfolio but here are some highlights.

1. Understand; that valuation is subjective, and the role of the agent.
2. Get familiar with factors affecting HMO portfolio valuations.
3. Set your target time frame for getting the sale agreed.
4. Understand the buyers for HMO property portfolios
5. Price the HMO portfolio for sale according to the target time frame.
6. Prepare & present your HMO portfolio in the best possible way to maximise the potential value.

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