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What Should Be in an HMO Deal Pack? Ask to See One Before You Pay a Sourcer

Before you pay a deal sourcer a penny, ask to see an example deal pack.

Testimonials tell you people were happy. A deal pack tells you how the sourcer actually thinks: what they check, what they leave out, and whether they'll show you the uncomfortable numbers as well as the good ones.

This guide walks through what a good HMO deal pack should contain, using a real pack of mine for a 6-bed HMO conversion in central Folkestone as the example.

What a deal pack is for

A deal pack is the document a sourcer gives you to evaluate a property before you commit. Done properly, it should let you check every assumption yourself. Done badly, it's a sales brochure with a yield figure on the front.

Asking for an example before you work with someone costs you nothing. It also tells you, very quickly, which of those two you're going to get.

1. Why the deal exists

Every good deal has a reason it's available below value. If the sourcer can't tell you what it is, ask why not.

On the Folkestone deal, the angle was time on the market. The property was first listed at £375,000, sat for nine months, had two price cuts and found no retail buyer. Families didn't want to take on the refurbishment. For an HMO investor with the works costed and trades lined up, that same condition was the way in. The agreed price of £310,000 was 17% below the original asking price and around 20% below the local average.

That's the kind of explanation you should expect: specific, checkable, and tied to why the deal suits an HMO buyer in particular.

2. The full deal stack

Every cost between offer and refinance, line by line. That means the purchase price, legals, survey, holding costs, licence, planning advice, the refurbishment and the sourcing fee itself.

Line item	£
Purchase price	310,000
Legals and searches	1,800
Level 3 survey	800
Holding costs (4 months)	900
HMO licence	1,100
Planning advice	400
Sourcing fee	4,000
HMO refurbishment	66,000
Total project cost	385,000

If the fee isn't in the numbers, the numbers aren't finished. And if stamp duty isn't included, the pack should say so clearly, because it depends on your circumstances.

3. Rental evidence

HMO income is the sum of individual rooms, so it should be priced room by room. Not "£650 a room" across the board.

The Folkestone pack prices each of the six rooms by size and type: two en-suite rooms at £725 a month, three standard rooms at £625 and a smaller one at £600, for £3,925 a month in total. Those rates are benchmarked against live local listings, with en-suite rooms advertised at £700 to £775 and standard rooms at £585 to £650, bills included.

Ask where the rent figures come from. If the answer is vague, so is the income.

4. A costed refurbishment schedule

A "£60k refurb" on its own is a guess. A schedule breaks it down by works package so you can see what's included and challenge anything that looks light.

The Folkestone schedule covers the kitchen, two en-suites, the bathroom, a fire safety pack, electrics, plumbing and heating, flooring, decoration, furnishings, EPC improvements and external works, plus a contingency. Total: £66,000.

Look for the contingency in particular. If there isn't one, the pack is assuming nothing will go wrong.

5. Compliance

An HMO only earns once it's licensed, so the pack should show it can be. That means the licence type, the local authority, room sizes against the council's minimum standards, the bathroom ratio, the fire safety specification and the Article 4 position.

For larger HMOs, it should also confirm the planning route. If a pack doesn't mention compliance at all, the sourcer either hasn't checked or hopes you won't.

6. Valuation scenarios

The refinance valuation decides how much of your money you get back, so one figure isn't enough. A good pack shows a downside, a base case and an upside, and builds the numbers on the conservative one.

On the Folkestone deal, refinancing at 75% of the value:

Downside, £410,000: the valuer pulls back on the spec or the comparables. £77,500 stays in the deal.
Base case, £430,000: a bricks and mortar valuation. £62,500 stays in.
Upside, £520,000+: a specialist HMO lender valuing on income at a 9% yield. All money out.

The base case is the conservative one. The upside is shown, not banked. If you want to understand why the valuation method makes such a difference, read HMO Yields Explained.

7. A risk register

Every deal has risks. The question is whether the sourcer has named them and planned for them. The Folkestone pack lists:

Room voids (high): 95% occupancy is modelled, and rooms are listed four weeks before each tenancy ends.
Mortgage availability and rate (medium): a broker pre-qualifies the lender pool at offer stage.
Licensing delays (medium): the application goes in at completion, with a pre-application meeting with the licensing officer.
Refurbishment overrun (medium): fixed-price contracts with HMO-experienced trades, and a contingency in the budget.

A pack with no risks in it hasn't been thought through. For a wider list of what to check, see The 10 Risks to Check Before You Commit to an HMO Development.

8. A timeline

You're paying bridging or holding costs every week until the property is let and refinanced, so the pack should show how long that takes. The Folkestone plan runs from completion to first tenants in eighteen weeks, broken into acquisition, strip-out, build, furnishing and letting, then refinance.

The honest number

On the base case, the Folkestone deal leaves £62,500 in the property. That money still earns: £9,926 a year in net cashflow, a 15.9% annual return on it.

Not every deal gets all your money out, and that's fine if the return on what's left in is strong. What isn't fine is a pack that claims "all money out" on every deal. That's a brochure, not an analysis.