Buyer A and buyer B: who actually buys an up-and-running HMO?

There are two main types of HMO buyer.

Buyer A finds a property to convert, on their own or through a deal packager, aiming for an add-value phase, then cash flow, usually with a money-out refinance.

Buyer B buys a finished HMO, usually above bricks-and-mortar value, because of the value in the refurb, the furniture, the tenants and the business that already exists.

The developer type often can't understand why anyone would pay a premium for a finished HMO when they could add the value themselves. If everything went to plan, they'd be right. But builds overrun, costs spiral, refinances come back lower, planning gets delayed and things get missed, especially when you're relying on someone local to manage a project hundreds of miles from where you live.

A lot of finished-HMO buyers have had their fingers burned trying to develop first.

Many buyer Bs are also investing money made outside property. They've got successful businesses or jobs in other sectors, and they see a good return from a finished HMO as ideal. They don't need to develop, add value, take risks or pull money out. Often they're not property people at all.

The two have very different business models. In fact, buyer A often sells to buyer B: develop two, keep one, sell one.

Buyer B can be from the UK or Asia, a fund, a high-net-worth individual, someone from the care sector, or anything in between. What links them is that they see the value in an up-and-running, licensed HMO.

You'll never get buyer A to see the value in a tenanted HMO sold at a yield price, and that's fine. They're not the right buyer for it.

And buyer B isn't on the Facebook deal threads or the WhatsApp property groups. Those are full of buyer A: people looking for deals, to buy cheap and refinance, to JV, to raise investment. That's why tenanted HMOs don't sell well on Facebook.

You have to put them in front of the buyer who sees the value in the product.

First posted on my Facebook page. Lightly edited.