- Currency (GBP)
-
Language
Select Language
- Call: +44 (0) 161 337 3890
From valuations to presentation, our comprehensive guide to selling an HMO property is designed to help you plan and prepare, giving you the best chance to secure a successful sale.
Mark Burns | 15th March 2025
So you’ve owned it for a number of years, it’s been hard work but you’ve done well out of it, and now you’re thinking of selling. You’re inevitably thinking ‘How do I sell an HMO? Who can I talk to who understand the complexities of selling one, and who has the right type of buyers for my property?
Selling an HMO is vastly different from selling a more typical buy-to-let property, and the reality is that many of landlords of an HMO property have owned them for many years, but not a huge number have actually gone through the process of selling one. As such, we’ve put together the definitive guide to selling an HMO property, based on our experience of specialising in this sector.
One of the key differences in the sale selling an HMO property (in relation to a residential buy-to-let) is that is actually represents a two-way ‘beauty parade.’ Whereas the sale of a residential buy-to-let sees the main focus remain on selling the property correctly, the sale of an HMO sees a similar level of focus go on to the purchaser, and in particular the correct choice of purchaser.
The reason for this is that in recent years, we’ve seen a large increase in the number of landlords looking to invest in HMO properties, something which has increased considerably as the higher cost of finance has squeezed available margins on the traditional buy-to-let market.
Whilst there is undoubtedly a large demand for HMO properties, the reality is that certain buyers will prove far more attractive investors than others. In this your agent will play a key role is ascertaining which buyer you should choose to proceed with. Key considerations include:
How is the investor planning to finance the purchase? For example, will it be a cash purchase or are they looking to utilise commercial lending?
Proof of funds – Has the buyer provided proof of funds for the purchase?
What experience does the buyer have in managing investment properties? For example, do they already own HMO properties in their portfolio?
When we market your HMO property for sale, we advertise it not just to our database of over 30,000 global property investors, but also across the major property portals throughout the UK. A result of this is that we generate new enquiries for our HMO properties every day bringing interested parties to your property on a consistent basis. The key challenge for Pure Investor is to ensure that the proposed purchaser is able to complete the purchase successfully, and not just offer you the price you want to achieve.
Without doubt one of the key differences between selling a traditional buy-to-let property and selling an HMO is the planning required in the initial stages, and without doubt, getting your ‘ducks in a row’ is key to a succession completion of sale.
So what do we mean by ‘ducks in a row?’ Well that’s simple – documentation. Once you’ve made the decision to sell your HMO property, the next task is to make sure you have all the relevant documentation available.
Alongside the above required documentation, it’s always worth considering other questions which may come up during the process. Is the property within an Article 4 area? Where there any additional conditions to the licence and is there supporting correspondence or documentation which you can provide?
Remember, when selling an HMO property there are a number of parties who will be requesting this documentation. Your solicitor, the buyers’ solicitors and potentially the lenders solicitors will all require this documentation from you.
Whenever there has been a problem with selling an HMO property, it invariably comes down to the documentation, and a lack of the appropriate paperwork can result in a sale experiencing significant delays or even a withdrawal. As a result, when a landlord contacts us with a view to selling their HMO, the accessibility of the relevant documentation is our first and most important conversation.
In recent years, the growth of the HMO market has seen more distinct categories of HMO property develop. Whereas previously an HMO property tended to be an all-encompassing term, today there are numerous types of HMO property, and it’s worth considering what type you will be selling, and how it will be marketed.
The wider macro-economic factors within our economy have seen an increasing number of young professionals seeking to co-habit in properties rather than rent or purchase their own property. However, rather than simply accept more the traditional specification of HMO, they are more discerning, demanding better facilities and communal areas. In recent years, we’ve seen an increasing number of professional or Co-living HMO’s coming on to the market, and they’ve typically proven hugely popular with our investors looking to purchase.
If you feel your property should be classed as a Co-living HMO, then it’s certainly worth considering closely how this will be presented to the market. For example:
Professional photography – you need to present your property in the best possible light, and this requires professional photography. Remember, we have a network of over 31,000 property investors from all over the world, we need to present your property in the most comprehensive way possible. Ten photo’s taken from the phone will not maximise your sale value, it will actively detract from it!
Over the course of the past ten years, the nature of the student accommodation sector has seen considerable upheaval. The growth of the purpose-built student accommodation (PBSA) student accommodation sector has coincided with a large increase in the numbers of overseas students (typically higher disposable income), and this has resulted in a change in the required standard of accommodation for students. Today, students are more discerning customers, and they are demanding higher standards of their accommodation. Gone are the days of cracked windows and broken boilers, and today students demand better locations, better facilities and faster broadband.
If you’re looking to market your property as a student HMO, it’s worth considering how you can evidence your track record with students. What contact do you have with the local university accommodation services and providers? It’s always worth thinking how you make that transition of ownership as simple as possible. Rest assured, your buyer will be looking for it, and more importantly will value it.
Another sector which has seen considerable growth in recent years is the social housing and local authority HMO. As with the prolific growth in the demand for professional co-living accommodation, the uplift in demand for social housing has been dictated by the wider economic headwinds facing our society and economy.
Landlords looking to invest in social housing will be looking for the potential for higher rental yields backed up with the security of longer-term government schemes. As such, bringing to market a social housing HMO means you need to provide supporting documentation and evidence of this relationship. As with all HMO property sales, proof of track record of this relationship with the social housing provider is key to maximising the value on your sale. Similarly, can you evidence alternative options (other social housing providers) who the buyer could potential work with in the future? Evidence of a Plan B often provides the assurance a buyer is actively seeking when investing.
Here at Pure Investor, we’ve specialised in the sale of tenanted investment properties for over 10 years, and over this time we’ve developed a deep understanding of what investors want. This allows us to work with you to provide an accurate and realistic valuation on your HMO property. Getting this valuation right is key to ensuring you maximise your sale value whilst also ensuring your property does not sit on the open market for an extended period of time.
When considering the sale value of your HMO property, it’s always worth taking a look at the market to see what net rental return other HMO’s are being marketed at, as this will give you an indicative valuation to work with. For example, a look at the HMO Property Channel on Pure Investor will clearly show a range of options where the net rental income ranges between 9% - 12% net. However, within this range, there are a number of key factors which can affect the valuation of your HMO:
HMO Valuation – Preparation Is Key!
As all HMO landlords will know, the valuation is a key factor in any potential HMO sale, and as such preparation for this is crucial to ensuring the process continues smoothly through to a successful completion. Whilst a good number of our clients are cash investors, the majority will be looking to utilise finance to buy your property.
Good preparation will minimise the risk of a down valuation which has the potential to see your buyer withdraw from the sale, and as such preparing appropriately is an important component of the HMO sale process.
Things to consider:
As we highlighted earlier, the correct choice of purchaser is key to ensuring the successful completion of sale on an HMO property, with the key consideration being how they are proposing to finance the purchase. Increasingly, we are seeing large number of investors looking to utilise commercial lending to purchase HMO properties, particularly towards the larger, professional and co-living HMO’s where valuations are typically higher.
The key difference here is that whilst a ‘bricks and mortar valuation’ will focus on the more physical attributes of the property (size, number of bedrooms), the surveyor will utilise market comparables of similar properties to ascertain the valuation. However, a commercial valuation will primarily focus on the net operating income (NOI) of the property rather than simply the physical attributes. In this calculation, the surveyor will look to assess the potential gross rental income of the property, and then deduct the operating costs. The net operating income, applied in relation to a market yield will generate an estimated valuation on the property.
As well as the calculation between NOI and yield, other factors will still be considered within the commercial valuation including location, specification and finish and wider demand for HMO properties within the area.
Given the importance of the valuation within the wider process, we always recommend that the valuation is booked and confirmed as early as possible in the process.
It’s worth noting that commercial valuations typically start at the 6-bedroom (ensuites) HMO region, however on HMO’s properties larger than 6 bedroom, then a commercial is very much standard.
One of the key considerations of all purchasers, but something often undervalued by the agent, is that of how the property is managed at the moment, and how it will be potentially managed moving forward. The reason we raise this, having sold tenanted properties for over 10 years, is that the vast majority of investors are actually looking for ways to bring properties into their portfolio in a efficient and more importantly scalable way. As such, when presenting your property to the market, it is worth highlighting to potential purchasers how the property is currently managed, and what this entails. For example, do you self-manage or do you utilise the services of an agent? If you outsource the management to a local agent, who are they and what do they charge/offer? Do the communal areas get regularly cleaned and how much does this cost? If you self-manage, what technology or applications do you use to minimalise the day-to-day workload of the management?
The ability to be able to offer an effective transition of ownership will undoubtedly prove appealing to even the most ‘hands-on’ landlords. Downloading this information to your agents will help them identify the best possible buyer for your HMO, giving you a better chance of a successful outcome.
Call our team today on +44 (0) 161 337 3890
