Did you know that HMOs are valued differently depending on their size and the area they are located in?
There isn’t just one size fit approach when it comes to HMO valuations. Several factors are involved to make the decision of how the HMO will be valued. The size of the property, how it has adapted, local planning regulations and demand from investors and tenants.
Understanding which valuation method applies can make a significant difference if you are purchasing, refinancing or selling an HMO.
Small HMO (Up to 6 Bedrooms)
- Unextended, unadapted house
- Occupied by up to six people
- Property with a standard residential layout
- Property with little to no adaption.
These properties are mainly valued using Bricks & Mortar approach. This means they are assessed in the same way as traditional residential property.
Large HMO (7 or more Bedrooms)
- Have planning permission for HMO use
- Be heavily adapted for multiple occupants
- Include specialist layouts and multiple shared facilities
- Be purpose-built or extensively converted for HMO use
This properties are mainly valued using a Commercial/Investment approach. Instead of the property being valued using residential value, the valuation is based on the property’s income (yield).
When Will a Property Be Valued on a Bricks & Mortar Basis?
Even if a property has six bedrooms and six occupants, it may still be valued using the Bricks & Mortar approach if:
- The property is located outside an Article 4 area
- There is little or no demand from HMO investors
- There is limited tenant demand for HMOs in the local area
In these circumstances, valuers may determine that the property’s value is best reflected by the residential market rather than its investment potential.
Why Does the Valuation Method Matter?
Finance options can determine whether the HMO is valued on Bricks and Mortar basis or a Commercial/Investment basis. Ensure you seek advice before making a decision.
Not sure how your HMO should be valued?
Whether you are refinancing, selling or just want to understanding how your property is likely to be assessed, we’re here to help
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