Are you ready to dive into the exciting world of HMO valuations? Whether you’re a seasoned investor or just starting out, understanding the different types of valuations can make a HUGE difference in your investment strategy. Let’s break it down!
1️⃣ Bricks and Mortar Valuation
This is the traditional method used for valuing properties. It considers the physical structure and condition of the property, similar to how you’d value a standard residential house.
Advantages:
• Straightforward and easy to understand.
• Widely accepted by lenders.
Disadvantages:
• Doesn’t always reflect the true income potential of an HMO.
• Might undervalue a high-yielding property.
Calculation: Based on the comparable sales of similar properties in the area. Think of it as comparing apples to apples!
2️⃣ Commercial Valuation
This method values the property based on its income potential, much like how businesses are valued. Perfect for those high-yield HMO investments!
Advantages:
• Reflects the true earning potential of the property.
• Can result in a higher valuation, meaning more borrowing power.
Disadvantages:
• More complex and can vary depending on the valuer.
• Less accepted by some lenders.
Calculation: Based on the Annual Net Rental Income divided by the Yield. This gives you the property’s income-generating power!
3️⃣ Hybrid Valuation
The best of both worlds! This method combines aspects of both Bricks and Mortar and Commercial valuations.
Advantages:
• More accurate reflection of the property’s true value.
• Balanced approach, considering both physical condition and income potential.
Disadvantages:
• Can be tricky to get right.
• May require expertise to navigate.
Calculation: A blend of comparable sales and income approach, giving you a well-rounded valuation!
Why Does This Matter?
Understanding these valuation methods can help you make smarter investment decisions, negotiate better deals, and ultimately maximise your returns! If you’re looking to invest in HMO’s in Medway and surrounding areas, let’s connect! I specialise in sourcing HMO properties and can help you navigate these valuations to make the most out of your investments.
Let’s Talk!
Feel free to book an appointment using the link on our Investor page.