Why Student HMOs Can Qualify for Commercial Valuations – Even 4 or 5 Beds
One of the most attractive and often overlooked features of Student HMOs (Houses in Multiple Occupation) is their eligibility for commercial valuations – even when they’re as small as 4 or 5 bedrooms.
In the world of property investment, it’s widely accepted that HMOs typically need to be 7 bedrooms or more to qualify for a commercial valuation. While there are occasional exceptions to this rule, the general consensus is that smaller HMOs are assessed on a bricks-and-mortar basis. This often presents a challenge for investors as 7 bed HMO’s are very costly & bricks and mortar valuations are typically significantly lower.
However, Student HMOs represent a notable exception.
Why Student HMOs Stand Out
The key reason lies in their location. Most student properties are situated in Article 4 areas – designated zones where converting a single dwelling into an HMO requires planning permission. These restrictions severely limit the supply of HMO properties in such areas, while demand for student accommodation remains consistently strong year after year.
Because of this reliable demand and restricted supply, lenders are increasingly comfortable viewing Student HMOs not just as individual homes, but as income-generating assets. This shift in perception allows lenders to assess the property’s value based on investment metrics, such as rental yield or even a price-per-bedroom model – hallmarks of commercial valuations.
The Importance of Using the Right Lenders and Surveyors
It’s important to note that not all lenders or surveyors will take this approach. Securing a commercial valuation on a smaller Student HMO still requires experience and a clear understanding of which lenders and professionals are open to this type of analysis.
That’s where expert advice can make all the difference. By working with advisers who understand this niche, investors can approach purchases and refinances with greater confidence and predictability. The right team can help you navigate lender requirements, select surveyors familiar with student markets, and ensure that your valuation reflects the true investment potential of the property.
Benefits for Investors
For investors, this opens up a range of new possibilities. Smaller Student HMOs can now be purchased and refinanced on commercial terms, unlocking equity and improving cash flow without the need to invest in much larger (and more expensive) properties.
Compare this to a professional 5-bed HMO located outside an Article 4 area, where demand may be lower and planning restrictions looser. In those cases, lenders are far more likely to fall back on a traditional bricks-and-mortar valuation – often resulting in figures that don’t reflect the property’s income potential and can make deals much harder to stack.
Final Thoughts
Student HMOs offer a compelling investment strategy for those looking to benefit from strong demand, limited supply, and the potential for commercial valuations – even at a smaller scale. With the right advice and lender relationships in place, investors can leverage these opportunities to build a profitable and scalable HMO portfolio without overextending financially.
If you’re exploring the student HMO market and want guidance on valuation strategies, lender selection, or property sourcing—we’re here to help.