Unrealistic HMO Property Investors?
Had two interesting situations yesterday with 2 investors. One from London and one from the Middle East. Firstly not sure if they are right or if we are right. The story is rather simple. Both investors came and visited with us in Manchester. They both liked the finish of the HMO properties we showed them. One was a professional HMO and the other was a Social HMO on a 5 year contract…no voids…no management…and maintenance covered up to 5,000 per annum. More importantly they LOVED the yields we are selling the properties. However what the 2 of them could not get their heads around was houses on the same street brick and mortar values were significantly less. What we explained was that to some degree, these are not simply houses any more. They are small businesses. Actually if over 6 rooms they are valued commercially. More so, on our professional HMOs we have invested anywhere depending on en suites and rooms somewhere between 40,000-45,000. The next point we made….These Professional HMOs generate depending which ones and number of bedrooms between 23,500 up to 31,500 per year. Compare that to the rent of a nearby Terraced house you might be lucky to get 7,200 a year.
My JV partner called them unrealistic, time wasters and rather non professional. They wanted the yields we are offering but expected to pay the same as a near by house.
Thoughts?
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