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The Client’s Situation
An experienced property investor approached Advocate Finance seeking to raise capital from an existing small HMO. The property was let on a room-by-room basis and producing strong rental income. The investor wanted to release equity to fund future projects, but the choice of lender and type of valuation would significantly affect how much capital could be raised.
The Challenge
The main issue was how the property would be valued. Some lenders treat smaller HMOs as standard buy-to-lets and apply a bricks-and-mortar valuation, which typically results in a lower figure. In this case, the property’s income potential was strong, and a buy-to-let valuation would not reflect its true worth.
The investor needed a lender who would instruct an investment valuation based on rental income, even though the HMO only had a small number of rooms. Securing this was crucial to unlocking the maximum funds available.
Our Solution
Advocate Finance identified a lender prepared to assess the property using an investment valuation method. This meant the valuer considered the property’s rental income and demand for HMOs in the local market, rather than just comparing it to standard residential houses.
We worked with the lender and the valuer to ensure the property’s strong occupancy record and rental figures were clearly demonstrated. By highlighting the stability of income and the investor’s track record in managing HMOs, we secured agreement for the higher valuation approach.
The Result
The lender applied an investment valuation, significantly increasing the property’s value compared to a standard bricks-and-mortar assessment. As a result, the client was able to raise substantially more capital, which provided the funds needed for their next investment project.
This case shows how the right lender and valuation method can make a considerable difference to how much capital an investor can release.
Client Feedback
“Megan and her team at Advocate were absolutely fantastic at sourcing us a great refinance deal for our HMO. I would highly recommend them and will be using them again for our future refinance requirements.”
How We Can Help You
At Advocate Finance, we understand the nuances of HMO valuations and how they impact capital raising. Whether you have a small HMO or a large portfolio, our expertise helps ensure you get the most out of your investment properties.
