How does a lender assess a HMO when determing whether they can lend you the funds to purchase one?
Essentially, they value the property in very much the same way as a single-let property; using sold comparables in recent months and the local area to determine the property value.
To assess the HMO rent is slightly more complex when trying to finance a HMO.
Most surveyors I’ve met will survey a room at low figures more akin to student letting than key worker or professional lets. This means that you have your work cut out when you are aiming at renting your HMO to a group of professionals at £400+ pcm rates.
I’ve often had surveys back where they’ve valued a 6 box property at £50 per week per room which is a lot lot lower than the £85 to £120 per week I normally get! The best thing to do is to work with them, show them evidence of rents in the area (use websites like spareroom and easyroommate) and tell them what you are planning on doing. Sometimes they will listen – sometimes they won’t.
Once the valuation of the property and the rental valuation are done, everything else proceeds as normal.