How to Gain an HMO Commercial Valuation

What is a Commercial HMO Valuation?

An HMO commercial valuation is a type of assessment carried out on an HMO in order to understand the value of the property. This professional assessment is for HMOs that are run for commercial purposes and it focuses on determining how much the property is worth in terms of the commercial investment, taking into account a variety of factors such as market value and potential rental income.

HMO Checker takes the hassle out of Commercial Valuations

Take a look using the #1 tool for HMO property sourcing & analysis.
Take Me There

What is the purpose of a Commercial Valuation?

For lenders who offer HMO mortgages or loans, the purpose of an HMO valuation is to essentially assess the value and risk that is associated with the concerned HMO property when they are considering providing finance for landlords and investors. Your lender will need to evaluate the overall market value of your HMO to determine how much they are willing to lend you.

There are a few specific reasons a mortgage broker or lender will require this:

  • LTV Ratio – This helps determine the level of risk lenders are taking
  • Collateral Assessment – To determine resale value in the instance of default by the borrower
  • Risk Mitigation – Ensuring the loan amount aligns with the value of the HMO
  • Approval Decision – The valuation plays a crucial roles in the approval of the loan
hmo designers sketches

What factors are assessed in an HMO valuation?

As we’ve already explored, the process of valuing an HMO involves various factors in order to determine its market worth. There are usually several factors that can be taken into account during this process:

Rental Income

The potential rental income of your HMO investment is an important aspect of any HMO property valuation. A professional valuer will take into account a number of factors such as the number of rooms, the local market conditions and occupancy rates.

Property Condition

Your valuer will assess the overall state of your HMO property including its amenities, the quality of the rooms and the communal spaces. Properties in good condition with desirable features, such as a property that has been recently renovated, can be more attractive to potential tenants, yielding higher rental income.

Location

Where your HMO is located plays a role in its overall value. This includes factors such as how close it is to important transport links, what the neighbourhood is like and the proximity to amenities like shops, restaurants and more.

Market Conditions

Your valuer will analyse the market and current valuation trends, assessing the sale prices or rental income of comparable HMOs that have been recently sold or let in the same area.

Licensing

As an HMO landlord or investor, you are subject to HMO licensing requirements imposed by your local authority. Your surveyor or valuer will consider compliance factors such as fire safety, room sizes and your licensing status.

How to gain an HMO Commercial Valuation

In the majority of instances, your chosen lender will appoint your valuer as they often have their own panel of surveyors whom they have already established relationships with. Therefore, when you apply for funding, your finance provider will issue you with a surveyor.

In some instances, you may be given the opportunity to suggest your own valuer or surveyor to your lender for them to consider. Particularly if you have a preferred valuer, you can put this forward for consideration during your loan application process. They may take this into account and see if they meet their criteria.

This valuation report is an essential part of your investment as an HMO landlord, and so when investing in property in this way, you should consider the influencing factors outlined in this article that detail what surveyors look out for during an HMO commercial valuation before throwing in your investment.

Subsribe to Our Newsletter

Book a session with an HMO Expert