Are commercial valuations appropriate for higher yield HMOs?
9:50 AM, 5th September 2022, 4 years ago
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I’m hoping to sell my portfolio of 4 x HMOs in Aberdeen. 2 are 5-bedroom flats with a yield of around 8% depending on valuation, but the other 2 properties are larger (12 bed and 9 bed) and have higher yields of 14-15% – again depending on valuation.
Is a commercial valuation more appropriate for the bigger ones based on yield?
Also, can anyone recommend a Scottish broker who can sell tenanted properties?
Thank you
Karen
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Member Since January 2020 - Comments: 559
11:57 AM, 5th September 2022, About 4 years ago
A yield valuation can be acceptable for large HMOs, but there are a lot of variables. We do them for banks. We need to know the costs included in the rent and the extent of owner management in assessing the yield. Included costs are a bit of an issue at the moment, for obvious reasons.
If a HMO is well set up – good leases, compliant and decent buildings then we have seen 14-15%. As with all valuations, the devil is in the detail. Betetr to be hear a hospital, university, or other source of mass employment.
Member Since November 2014 - Comments: 5
12:37 PM, 5th September 2022, About 4 years ago
I’ve recently been remortgaging several high yielding HMO’s and all the valuers refuse to take the yield into account. They. Valued the properties purely based on the residential value.
Given the current impending downturn I’d be surprised if many valuers devoted from that cautious stance.
Member Since July 2015 - Comments: 19
5:14 PM, 5th September 2022, About 4 years ago
Reply to the comment left by Graham Bowcock at 05/09/2022 – 11:57
Hi Graham
Thank you for your reply – that was extremely useful.
Regards
Karen
Member Since July 2015 - Comments: 19
5:14 PM, 5th September 2022, About 4 years ago
Reply to the comment left by Tom Kirkwood at 05/09/2022 – 12:37
Hello Tom
Thanks for your reply.
Karen
Member Since July 2016 - Comments: 2
2:58 PM, 25th April 2024, About 2 years ago
Hi all. Can I resurrect this thread.
I am looking to develop a commercial property we own into a suis generis HMO with 8 rooms comprising studios, kitchenettes and ensuite rooms. It will clearly not be a traditional residential property so am attempting to get an idea of potential commercial valuation.
It is in Buckingham (North Buckinghamshire) and next to the University (500m).
I have seen the following formula:
(Gross rent pcm – normal costs pcm) x12/yield
My issue is what yield multiplier to apply. Any ideas?