Selling a rooming house: value, permit and sale with tenants

What is a multi-occupancy house worth?

The value of a room rental property is the annual base rent divided by the gross initial yield that buyers demand for that city and that property type. In student cities, that yield is usually lower (and the price thus higher) than in smaller places.

Calculation example: eight rooms yielding an average of €475 basic rent per month give €45,600 rent per year. If the market calculates a gross initial yield of 7% for that property, you arrive at an indicative value of €45,600 / 0.07 = approx. €651,000. If the yield is 8.5%, the same rent stream drops to approx. €536,000. The difference is not in the bricks, but in the risk that a buyer assesses.

What we see in practice: many owners look at what the property would fetch as a single-family home. An investor does not do that – they buy the exploitation. Only when the property is worth more after individual sale than the rental flow justifies, does the residential value count as a floor.

What does the permit do to the selling price?

A transferable, property-linked conversion or withdrawal permit is the most important document for buyers. If it is missing or the permit is personal, a buyer will factor in the risk that the room-rental must cease and will offer significantly less.

In many municipalities, room-by-room rental is subject to a permit via the housing ordinance. The conditions differ per municipality: sometimes a maximum number of HMO properties per street applies, sometimes a quota per district, sometimes a requirement regarding sound insulation or bicycle storage. Inquire with your municipality which permit has been granted for your address and whether it transfers upon sale.

• Request the permit decision and the associated drawing from the municipality.
• Check if the permit is property-bound or in the name of the current owner.
• Check if the number of let rooms corresponds to the number of permitted rooms.
• Collect the latest fire safety inspection and the report of any audit.
• Honestly record non-enforcement situations (gedoogsituaties) in the purchase agreement; concealment leads to liability later.

Selling with sitting tenants

Selling with sitting tenants is always possible: in the Netherlands, the rule 'sale does not break lease' applies. The tenancy agreements transfer automatically to the buyer, the tenants retain the same rights and do not need to sign anything.

For investors, a tenanted rooming house is precisely the product they are looking for: the cash flow continues from day one. However, a buyer wants to know exactly which rental regime applies. Individual room contracts (non-self-contained living space) work differently than self-contained studios with their own facilities, and since the Affordable Rent Act (Wet betaalbare huur), the point score determines the maximum rent price.

• Create a rent list: room, base rent, service charges, commencement date, notice period and security deposit.
• Settle prepaid rent and security deposits at the notary.
• Inform the tenants about the new landlord after signing the purchase agreement.
• Check if the service charge settlement for the current year has been prepared.

Checklist: preparing your room rental property for sale

Create one file with information for each room and for the whole building. A buyer needs to compare rental income with contracts, permits and costs; residents do not need to leave for this.

Distinguish base rent from service charges. Service charges are not freely available rental income. A high rent received is not automatically a legally permitted rent; check the rules applicable to each room and contract.

Selling a student property: what changes for residents?

The sale itself does not end the tenancy. At completion, agree clearly on the new landlord, payment details, management and handling of deposits and service charges.

A student house describes a type of use; for the sale, the actual layout and leases matter. Individually let rooms, self-contained studios and one joint tenancy each require their own assessment. Do not assume that all rooms can be sold separately.

• Arrange any viewings with residents and respect their privacy.
• Check which landlord obligations and outstanding settlements transfer.
• Record when rent is apportioned and who takes responsibility for management.
• Have tenancy and permit issues for your address assessed before giving warranties to a buyer.

To whom do you sell a room rental property?

Are you in a hurry, do you want no viewings past your tenants and no financing proviso? Then a direct sale to a fixed buyer is usually the calmest route. If you want to get the last euros out and you have time, then an agent process or selling off units pays off.