Owners of student houses tend to think in gross rent. Institutional buyers think in net operating income and the yield they need on it. Understanding the gap is the first step to a good sale.
The range
From the buyers we speak to, well let student HMO portfolios of scale are currently priced at net operating income yields in the region of 6.5 to 7.5 per cent. Where a portfolio sits in that range depends on the factors below.
What moves the price
Location: proximity to campus in cities with strong and growing student numbers
Quality and compliance: licences, EPC ratings and the cost of bringing houses up to standard
Evidence of income: occupancy and rent collection over several years, not one good year
Operating costs: management, maintenance and utilities included in rents, properly accounted for
Scale and shape: enough beds in each city for a buyer to run them efficiently
Why net income matters
A buyer will rebuild your income statement from the tenancy schedule and costs. If your own figures already match how they will see it, there are fewer surprises and less room for the price to slip.
One buyer or several
Different buyers value different parts of a portfolio. Selling to more than one can achieve more than the single bid for everything.
For a free, informal view of what your portfolio is worth, call James Innes on 020 7850 4760 or email james.innes@chrystalcapital.com.
This article is general information and is not advice.