Licensed HMOs are selling for almost 50% above the average house price in some parts of England as buyers snap up strong investment purchases that generate regular income.
New research from investment firm Excellion Capital reveals that the average licensed HMO in England sells for £334,260 - 13% above the average house price (£295,654).
HMOs are particularly attractive to investors as, unlike a typical rental property, they can generate rental yields of up to 12.5%.
The HMO premium grows significantly larger in some of England’s major cities, says the firm. In Newcastle, where the average house price is £211,160, HMOs sell for an average of £315,890 - a staggering price premium of 49% - while in Nottingham, an HMO sells for £282,942, 45% above the average house price.
Cities with similar hefty premiums include Liverpool (39%), Birmingham (36%), Bristol (30%), Bradford (29%), Sheffield (28%), London (26%), Leicester (23%), Manchester (22%), Leeds (16%), and Brighton (8%).
Anyone looking to buy an HMO will find it makes sense to source one that already has a licence as this will have increased value, according to Robert Sadler, vice president of real estate, but even if the licence has expired, it sets a precedent that should make getting a renewed licence faster and more straightforward.
“Our research shows that investors who wish to buy a property, carry out the necessary conversion work, and then sell it on can also consider the sector to be one of plentiful returns,” he says.
“We have worked with investors who have purchased a property, carried out the necessary conversion work and straight away seen the value of the property increase by at least a third.
"This property can be sold for a good return, but those investors who choose to keep hold of the asset and benefit from the 12.5% yield will then also benefit from the reliable capital appreciation of their asset over the years.”
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