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How to Sell a HMO

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This article will look at the key aspects of putting up your HMO for sale, as well as looking at ground rents for sale. Whether you’re looking into HMO mortgages, HMO insurance, HMO sales documents, and HMO requirements. With regards to ground rents for sale, we will look at the ground rents income fund, and ask how to purchase ground rents. It covers buyers, sellers, freeholders, and leaseholders.

What defines a HMO?

An HMO is a House in Multiple Occupation. According to Shelter, Your home is probably a House in Multiple Occupation if 3 or more unrelated people live there as at least 2 separate households – for example, 3 single people with their own rooms, or 2 couples each sharing a room, or the 3 or more people living there share basic amenities, such as a kitchen or bathroom.

How to check if a house has a HMO licence

Before we get into asking about the ground rents income fund or how to purchase ground rents, we will start with the basics.

If you want to check if a house has an HMO license, you should be able to see it in communal areas. According to Foxtons, an HMO license must be clearly displayed within the communal areas along with the name, address and telephone number of the licensee or property manager of the premises. In addition, a copy of the current gas safety certificate must be on display.

If you haven’t yet turned your property into an HMO, it is essential you contact the freeholder to let them know.

Furthermore, before you decide to put up your HMO property for sale, if you are not sure whether the house needs to be given an HMO license, then contact your local borough council. More often than not the council’s website contains the relevant information.

To obtain an HMO license you need to ensure the property is suitable for HMO. It’s mostly about meeting the health and safety HMO requirements. HMO licences must be renewed before they expire (they usually last for 5 years, but can vary by local authority), and landlords have HMO requirements insofar as they need you to provide a license. They cost between £100 to £200 per year. Some HMO requirements may include the following; installing fire doors, supplying fire blankets and fire extinguishers, and installing specific types of door handles and locks (e.g. Thumb Turn Locks). The HMO requirements may vary from council to council.

HMO insurance information. As you would expect, the terms of your HMO insurance policy will be different to a single property. Make sure to register your property as an HMO property for sale, as if you don’t, you will jeopardise your HMO insurance cover. There is a chance you may have to examine the replacement cost of items in your property and include this in any potential HMO insurance quote.

Differences between selling a HMO and a regular property

Selling a property with an HMO license can be difficult, and very different to selling a regular property. When putting up an HMO for sale, it can be very difficult to accurately value, which we will expand upon below. Additionally, there are few people who would be willing buyers of HMOs. Those buying HMOs will predominantly be landlords and investors. As a result of this, it is hard to find these buyers. You will find that many estate agents will not have waiting buyers for HMOs.

What is the process of a HMO Sales transaction and how long does each process take?

HMO sales documents. When you put up an HMO for sale, the thing that gives potential house of multiple occupancy buyers the confidence to make an offer is the full package of HMO sales documents relating to the property, offering the buyer complete transparency. HMO sales documents include but are not limited to; HMO Floor Plan, Building Regulation Certificate, HMO Planning Documentation, Fire Alarm Certificate, HMO Licence Certificate. Before you decide to put up your HMO property for sale, make sure you have all the correct HMO sales documents.

Crucially, HMO buyers need to be able to raise the finance to buy your HMO or be cash buyers. Ideally, they should have cash waiting or an HMO mortgage in principle. Bear in mind that getting an HMO mortgage is usually more difficult and expensive than getting a standard residential mortgage.

With regard to how long the process of selling a house of multiple occupancy takes, it depends on the method you choose. If, for instance, you have chosen to sell your house of multiple occupancy at auction, it will take at least twenty-eight days for the sale to complete. This takes into account marketing and is only actionable if there are bids made on your house of multiple occupancy. However, after you have put up your HMO for sale, you can sell your HMO directly to a cash buyer, which is a quick and guaranteed way of cementing a sale.

How to value an HMO property.

It can be tricky to value an HMO property for sale. In most cases, a House in Multiple Occupation is not valued as a property as a normal house would be. Typically, a House in Multiple Occupation is valued as a business. The value of an HMO is usually based on the income it generates not its bricks and mortar value.
There can be some exceptions to the normal rules of house of multiple occupancy valuation. For example, a small HMO property for sale that could also be used as a single home may be valued as a home instead.
When putting up your HMO for sale, it is important to value your House in Multiple Occupation accurately and aim to be realistic about your asking price, as incorrect valuations will cause problems with the sale later. Take advice from a valuer who is experienced in valuing . The valuer may need to view the HMO and see financial information about it to provide you with an accurate valuation.

A word on ground rents for sale.

What about buying ground rents for sale? If you’re wondering about what to do with the money you get from selling an HMO, and wondering how to purchase ground rents, we have you covered. A ground rent describes the full ownership of a portion of land where a second party, normally a leasehold property party, owns a long-leasehold property agreement on the said land. The leasehold property holder is typically the owner of any buildings or structures on the land and will be responsible for any rents relating to the building or buildings. For the buildings to remain on the land, the leasehold property owner pays an agreed ground rent to the freeholder. Therefore in simple terms, the freeholder receives a ground rent from the leasehold property owner who has buildings on that land. If you look into the ground rents income fund, they can assist you with any queries you may have.

Ground rents for sale are often there for freeholders (or perhaps head leasehold), interested in buildings which are arranged as flats, those flats having been sold off on long leases. You would receive a modest but very secure income stream. It would be a sensible question to ask how to purchase ground rents.

According to Investment Property, A ground rent investment is a good opportunity for certain property investors, with specific investment objectives and under the right circumstances. From an investment perspective, experience shows that it is possible to generate a return of around 5-10 per cent per annum on a ground rent. Thus, it is worth looking at ground rents for sale. Before anything, you should consult www.lease-advice.org on how to purchase ground rents.

You can consult the ground rents income fund, who “aim to deliver superior, long-term performance by investing in long-dated ground rents which have historically had little correlation to traditional property asset classes and have seen their value remain consistent regardless of the underlying state of the economy.” A link to the ground rents income fund is below.

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* Get the ball rolling with a valuation and avoid your house being repossessed.

Useful Links:

https://www.gov.uk/private-renting/houses-in-multiple-occupation

http://www.groundrentsincomefund.com/

www.lease-advice.org

https://www.londonpropertylicensing.co.uk/mandatory-hmo-licensing

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