According to research from Excellion Capital, the average HMO licensed property in England sells for around £334,260, which is 13.1% up from the national average house price of £295,654.
Newcastle reported the largest difference, with the estimated sold price for HMOs coming to £315,890, which is 49.6% higher than the average house price in the area.
This is followed by Nottingham, where HMO properties sell for around £282,942, which is 45.4% higher than the average house price sale.
Liverpool also reported a strong difference between HMO sold prices and average house prices of around 39.9%.
Rounding out the top 10 were Birmingham at 36.4%, Bristol at 30%, Bradford at 29.6%, Sheffield at 28.1%, London at 26.4%, Leicester at 23.1% and Manchester at 22.7%.
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| Table shows the average sale price of an HMO licensed property versus the average wider sale price in England and 12 of its major cities | ||||||
| Location | Est. HMO price – sold price adjusted | General – average house price | Est. difference (£) | Est. difference (%) | ||
| Newcastle | £315,890 | £211,160 | £104,730 | 49.6% | ||
| Nottingham | £282,942 | £194,654 | £88,288 | 45.4% | ||
| Liverpool | £252,283 | £180,278 | £72,005 | 39.9% | ||
| Birmingham | £321,411 | £235,602 | £85,809 | 36.4% | ||
| Bristol | £477,114 | £366,951 | £110,163 | 30% | ||
| Bradford | £237,668 | £183,382 | £54,286 | 29.6% | ||
| Sheffield | £283,853 | £221,638 | £62,215 | 28.1% | ||
| London | £697,716 | £552,073 | £145,643 | 26.4% | ||
| Leicester | £280,716 | £228,121 | £52,595 | 23.1% | ||
| Manchester | £302,564 | £246,630 | £55,934 | 22.7% | ||
| Leeds | £286,006 | £244,612 | £41,394 | 16.9% | ||
| Brighton | £465,694 | £428,112 | £37,582 | 8.8% | ||
| England | £334,260 | £295,654 | £38,606 | 13.1% | ||
The report added that as HMOs need a licence, when buying a property, it was important to check if it has a valid licence attached to it as it would improve the value. If it has expired, the firm said a precedent was set so renewal would be faster and more straightforward.
Robert Sadler, vice president of real estate at Excellion Capital, said: “We have previously spoken about the yield opportunities available from snapping up relatively cheap homes and converting them into HMOs, especially in England’s regional cities, and now this additional 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.
“In fact, 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 is a tremendous value-add over what can be a very short period of time.”
He continued: “Now this property can, of course, be sold straight away for a good return, but those investors who choose to keep hold of the asset and benefit from the 12.5% yield we previously reported, will then also benefit from the reliable capital appreciation of their asset over the years before selling choosing to sell it, at which point they’ll benefit from a sale premium of up to almost 50%, provided it comes with an HMO licence in place.
“By opting to finance this endeavour using debt, investors benefit from positive leverage, which, when done right, significantly boosts their return on equity.”
