Existing HMOs undercut estimated purchase and conversion costs

Landlords considering an HMO investment face a £191,618 gap between the average asking price of an existing licensed property and the estimated cost of buying and converting one.

Research by Rushbrook puts the average asking price of an existing licensed HMO in England at £340,264, compared with £531,882 for the purchase and conversion route.

The residential property management specialist identified 2,507 licensed HMOs advertised for sale.

Its figures cover different groups of properties, however, rather than a like-for-like comparison of the two options.

Buying an existing HMO

Roma Sharma, the firm’s managing director, said: “For those who would rather avoid undertaking a conversion, there is an established market of licensed HMOs available to purchase.

“However, buying an existing property doesn’t necessarily mean it will require no further work or investment, and landlords still need to carry out the appropriate due diligence.”

She added: “Whichever route investors choose, the initial purchase or conversion is only the beginning.

“HMOs bring additional management responsibilities, particularly around maintenance, tenant relationships and compliance, and ensuring these are handled professionally is essential to protecting the investment over the longer term.”

HMO conversion costs

The estimated conversion bill averages £82,084 across England, on top of a £449,798 purchase price for an eligible three or four-bedroom property.

Rushbrook calculated the building costs using regional construction estimates and the average number of bedrooms in existing HMOs.

London has the highest estimated conversion cost at £92,796, while the North East has the lowest at £70,955.

Once the purchase price is included, the estimated total investment in London reaches £957,105.

Licensed HMOs for sale

Yorkshire and the Humber has the lowest average asking price for an existing licensed HMO at £203,146, followed by the North West at £211,817.

London is the most expensive market for these properties, with an average asking price of £763,981.

Meanwhile, the South East has the largest number advertised for sale, with 478 properties accounting for 19.1% of England’s total.

The East Midlands follows with 416 listings, ahead of the North West’s 309 and the South West’s 304.