A house in multiple occupation (HMO) is a lucrative investment. It makes sense to improve the value of your HMO where possible to maximise your borrowing potential. From updating your property to extending it, there are various ways to ensure a higher valuation before refinancing your HMO.
Why increase the value of your HMO?
As a rental investment, it’s financially better to increase the rental income you can achieve from your property, whilst making it a more appealing option for tenants. But there are also other benefits to adding value to your HMO.
When applying for an HMO remortgage, you can release some of the equity in your property. This can be used to invest in a new property or perhaps to consolidate some debts. If you haven’t already got adequate funds to carry out improvements on your HMO property, the released equity can be used for that purpose.
The increased value from an improved HMO means that you’ll have a lower loan-to-value (LTV) ratio when refinancing. You’ll benefit from a more favourable interest rate, lowering the cost of your mortgage overall, and you may be able to secure better terms.
How to improve the value of your HMO
There are various strategies to consider that enhance the functionality and condition of your HMO property, both inside and out. These include maximising the space, improving the energy efficiency, making aesthetic improvements, complying with HMO regulations and ensuring all maintenance issues have been dealt with.
Increase the rentable space
Adding space to your HMO property increases its value. Take a look at the property’s layout to identify areas that can be improved. Larger rooms, for example, can be converted into additional bedrooms. A loft or basement can be converted into an additional bedroom or you can consider adding an extension to your property. Adding en-suites to the bedrooms enhances your property’s appeal to tenants and is a good way to increase its value.
Upgrade kitchens and bathrooms
Unless each tenant benefits from their own en-suite bathroom, the bathroom facilities have to be shared. Updating the bathroom suite, therefore, not only improves the standard for your tenants but also adds value to your property.
The kitchen can be improved in different ways. Look at its design and consider a redesign if that can improve its functionality and increase the space. A redesign can be very expensive but it will add considerable value to your property. Another way is to update the kitchen appliances. Removing old appliances and replacing them with modern, high-quality appliances instantly adds value.
Improve the energy efficiency
An energy-efficient property is desirable for tenants, especially with the current high cost of living. Improving your property’s energy efficiency adds value to it and there are various ways you can do this. For example, replace single-glazed windows with double glazing, ensure the property has adequate insulation, install low-energy lighting, fit draught excluders to doors, upgrade to an efficient heating system and ensure appliances have high ratings for energy efficiency.
Having an energy-efficient property is also beneficial as far as your mortgage is concerned. Lenders often reward borrowers for having energy-efficient properties with incentives, such as lower interest rates or cashback.
Refresh the decor
Give each room a fresh coat of paint for an instant and inexpensive boost to your HMO property. Pair this with updating old fixtures and replacing old furniture with new pieces to show that your property is well-maintained. This will increase its attractiveness to tenants and have a positive impact on your HMO property’s value.
Enhance the property’s exterior
First impressions count so it’s not just the property’s interior that affects the value. Take care of any exterior painting, tidy up the outside space and invest in landscaping. If you have the space, add extra touches, such as outdoor seating or bike storage. Add outdoor lighting at any entrances and pathways to enhance the security for your tenants.
Deal with any maintenance issues
A well-maintained property is not only more appealing to tenants and improves retention rates but it’s favoured by lenders. It lowers their risk and you’re more likely to benefit from a better interest rate and terms.
Consider off-street parking
Another aspect to consider is the possibility of offering off-street parking for tenants. This is a sought-after feature that provides convenience and security. Whilst this is an expensive undertaking, it can significantly increase the value of your HMO, depending on the location of your property and the types of tenants you rent it out to.
Comply with HMO regulations
Compliance with the regulations that apply to HMO properties can significantly impact the value. From a lender’s point of view, it reduces their risk and they’re more likely to offer a better interest rate and terms.
Maximise your HMO borrowing potential
As specialists in HMO mortgages, we can help you identify different ways to improve your property before getting a mortgage. It’s essential to detail the enhancements made ahead of the valuation to help the surveyor assess how the property’s value has been impacted. By adding value to your HMO property, you can not only increase your profits with a higher rental income but you’ll maximise your borrowing potential and benefit from a better rate and terms with the lender.
We work closely with lenders offering HMO mortgages and our brokers can compare the deals to ensure that you secure the best one for your property investment. Give us a call on 01322 907 000 to speak with one of our experts about how to maximise your HMO valuation.