HMO licensed properties carry premiums

Properties already licensed as HMOs sell for 13.1% above the average house price, analysis from debt advisory firm Excellion Capital has revealed.

HMO licensed properties typically sell for £334,260, compared to £295,654 across the general market.

They are more valuable for investors because they generally achieve rental yields of 12.5%.

In some of England’s major cities, this HMO premium grows significantly larger.

In Newcastle, where the general average house price currently stands at £211,160, HMOs sell for an average of £315,890, a premium of 49.6%.

Robert Sadler, vice president of real estate at Excellion Capital, said: “We have previously spoken about the yield opportunities available from snapping up relatively cheap homes and converting them into HMOs, especially in England’s regional cities, and now this additional research shows that investors who wish to buy a property, carry out the necessary conversion work, and then sell it on can also consider the sector to be one of plentiful returns.

“In fact, we have worked with investors who have purchased a property, carried out the necessary conversion work and straight away seen the value of the property increase by at least a third. This is a tremendous value add over what can be a very short period of time.

“Now this property can, of course, be sold straight away for a good return, but those investors who choose to keep hold of the asset and benefit from the 12.5% yield we previously reported, will then also benefit from the reliable capital appreciation of their asset over the years before selling choosing to sell it, at which point they’ll benefit from a sale premium of up to almost 50% provided it comes with an HMO licence in place.”