Top 5 ways to increase your HMO’s value

There is a significant difference between property valuation of a residential property and your HMO (House with multiple occupation). The main difference comes from the perspective on how Surveyor/buyer analyse on the deal. They look it as a ‘business’ and not just the property so you need to make sure that the HMO is furnished, tenanted, cash flowing, and with a specialist HMO management company in place.

1. Be proactively cautious while doing the renovation

Complete the HMO conversion project as if you were keeping it and managing the HMO – this includes not cutting corners because you’re might sell it later but also includes your furnishings, how you select the tenants and HMO managing agent – we see a lot of these type of HMOs made ready with poor aesthetics which effects the valuation of the property. We have managed couple of HMOs in the same street with the rental difference of 20%-25% which effects the HMO valuation.

2. Increase the rent

Perhaps the simplest and most cost-effective course of action to increase the value of your HMO is to raise the rent. However this has to be tempered with the knowledge that if you raise the rent too much, your tenants may leave and you may have a vacant property on your hands which will generate no income whatsoever. Do your market research carefully and evaluate what the ceiling is for similar properties in your area. If you find you are charging too little, write a clause into the rental agreement at renewal time that the rent will increase in line with market values. This will be especially relevant if you’ve recently made improvements to the property. The valuation of your HMO is generally 9 to 10 times of your annual rent so increasing the rent can directly effect the HMO valuation

3. Give your HMO an uplift

If you’re already the owner of an HMO, this may be easier said than done. However, you can add instant perceived value by maintaining the perimeter, ensuring the HMO is neat and tidy and driveway and lawn look rubble free and litter-free. Garden areas need to be regularly maintained, the grass cut and the weeds dug out.

HMOs do benefit from modern, secure, energy-reducing windows and doors which will not only let in more light and reduce noise but also demonstrate that you’ve invested in your property.

If the interior of your HMO is looking a little dated, get it professionally decorated in neutral shades. This is a sure fire way of attracting the right attention from quality tenants who pay higher rental– they can either simply occupy the property and can stamp their own individual touches on it.

Also consider the communal and utilitarian areas of your HMO – kitchens and bathrooms in particular. If you wouldn’t want to use your HMOs facilities why should your tenants?

Chance your appliances, Energy-efficient upgrades reduce your utilities bills increase profits from your HMO.

4. Increase size of your HMO

If you can extend, do a loft conversion, add a basement or make a outhouse office in your HMO property to increase its size, you can either get more tenants in or charge more rent. You will need to seek relevant planning permission before you alter your building as the lager HMOs falls into Sui generis catagory so you do not get permitted development rights.

If you can’t extend, think about maximising the rentable square footage. A qualified surveyor may be able to help you re-evaluate the space and add to the area that you can charge rent on – for example, a large but under-utilised reception area or an unused attic space could become an extra HMO bedroom.

5. Replace Property Management Company

Sometimes all that’s needed is looking at your HMO through a new pair of eyes. Different energy or philosophy can add value to your property. New property managers may be able to give you ideas on increasing income, decreasing expenses and giving your HMO a fresh, new look and feel.

Take a close look at the operation and efficiency of the property management firm responsible for managing your HMO. If the property is being mismanaged, or there are missed opportunities to reduce expenses, be sure to fix them. following points will give you clear idea when there is right time to change your HMO management company

  • Has your HMO management company focused on improving your returns
  • How the tenant non-payment handled in the past
  • Does your manager show a sense of urgency when you incur a vacancy
  • Are reports on performance easily obtainable?
  • Have they been transparent in their communication
  • Do the cost of repairs they charge appear reasonable
  • Does your manager know about your tenants
  • Does your HMO management company have an inspection process/records
  • How do your tenants feel about your HMO manager
  • Are the HMO management companies cost of services in line with the market

Contact us if you need more information about how to manage your HMO professionally

DISCLAIMER: I am not a RICS approved surveyor. All the information provided above are my personal opinions based on managing several HMOs in the past.

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