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This week, I got a lot of good questions about HMOs (Houses in Multiple Occupancy). This is where you take a house and rent it out by the room. I got a particularly good question about getting commercial valuations on HMOs. This is something I get asked about from time to time, so I thought it would be a good idea to cover it here on the blog. Below is the question and my reply. I hope it helps people to understand this issue a little bit better.
What are things I can do to ensure I get a commercial valuation on my 4 terrace to 6 bed HMO e.g. add extra stoves, ensuites?
So the first thing is, why do you want to get a commercial valuation? Because personally if I'm adding value to a property, whether it be a HMO or any property, the idea of wanting a high value is so that I can then borrow against the new value and pull my money out. So I'm assuming that that's what you're wanting to do. However, I'd love to know a little bit more about what the plans are with the property.
There are lenders that will look at doing commercial valuations on six bed HMOs; that's kind of the minimum that they will do commercial valuations on. As you say, the rooms need ensuite rooms. If it's bigger than that, if it's like seven/eight beds, then it is very standard – it will be a commercial valuation.
So the first thing I would do, if you are determined that you want to get a commercial valuation, is I would speak to an independent, whole of market mortgage broker. Someone that brokers all the different types of loans on properties. I would ask them, with this particular area and with this particular house, if I do this or that or the other, will there be lenders that are willing to give me a commercial valuation? Also find out what the rates will be, etc.
The second thing I want to say to you, Waves, is try and make sure with it being such a small HMO that the bricks and mortar valuation alone is also going to be where you need it to be. This is because commercial lenders of HMOs will also bear in mind the bricks and mortar valuation.
So if you need any more help, hit me up on Instagram or come along to one of our free live training programs. However, these are exciting times and I hope you do well!
If you would like a free ticket to my next training event click here. Act now because places go very fast! I hope to see you there and maybe we can have a chat about what you are doing in property.