Last updated: 27 Sept 2024
In this insightful episode of Deal Finder’s Corner, Richard Nicholls, an HMO valuation and sales expert, shared his wealth of experience in valuing and selling over 750 HMOs across the UK. Richard’s deep understanding of the complexities involved in HMO sales has made him a leading figure in this field, with a personal approach that adds immense value to both seasoned and aspiring property investors.
This blog covers the key takeaways from Richard’s discussion, focusing on how to value HMOs effectively, what factors influence their marketability, and how to prepare for a successful exit. Whether you’re new to HMO investing or looking to optimise your portfolio for future sales, these insights will help you maximise your property’s potential.
Article 4 areas, where additional planning permissions are required for HMOs, often present opportunities for higher valuations due to the restrictions on new developments. Richard noted, “Article 4 areas cap supply, which means demand can increase, pushing up HMO values over time.” However, it’s essential to be mindful of when Article 4 is introduced, as this can initially flood the market with new properties.
This is particularly relevant in towns and cities where high demand and student populations drive up property values. Richard shared, "The introduction of Article 4 doesn't immediately increase HMO prices, but over time, the reduced supply of new developments can lead to increased demand for well-managed, compliant HMOs."
In Derby, where Article 4 is about to be introduced, Richard predicts a dip in HMO values as developers rush to complete conversions. However, over the long term, the restrictions will likely enhance property values as the market stabilises.
Preparing an HMO for sale goes beyond just meeting basic standards. Richard explained, “The key to optimising HMO value is ensuring the property is not only compliant but also systemised for efficient management.” Simple steps like upgrading insulation, installing energy-efficient systems, or ensuring consistent maintenance can significantly increase the property’s appeal.
He also emphasised that optimised running costs and low-maintenance systems can make an HMO more attractive to potential buyers. Energy-efficient features such as solar panels or heat pumps may not always be essential but can add long-term value, especially in today’s eco-conscious market. Buyers are increasingly looking for properties with lower operational costs and modern amenities, making these features worthwhile for sellers to consider.
“It’s not about finding a buyer—it’s about making your HMO more salable, which comes from optimising it right from the start.”
Richard Nicholls emphasised that understanding the specific variables in HMO valuations—such as location, compliance, and tenant type—is essential for any investor. Optimising the property with future sales in mind can lead to higher returns, and knowing when to sell, particularly in Article 4 areas, can give you a competitive edge. Additionally, ensuring your property is fully compliant, well-maintained, and energy-efficient can increase its salability and market value.
For real-world examples of successful HMO investors, see how Phil Bygrave's 30 HMO deals success story demonstrates the power of systematic sourcing. This practical example reinforces the importance of understanding valuation variables and optimisation strategies that Richard Nicholls discusses.
To learn more about HMO valuations and how to optimise your portfolio for maximum returns, watch the full episode of Deal Finder’s Corner with Richard Nicholls on YouTube. Subscribe for more expert insights on property investment.
Deal Finder's Corner is your weekly property talk show, proudly brought to you by Property Filter. Our mission is to equip you with the best resources by inviting expert guests to share the most up-to-date and effective strategies, tactics, and insights for finding and securing property deals across the UK.
