## Compare the two valuation methods
Specialist HMO sources describe two main methods: bricks-and-mortar comparison and income valuation based on rent and a market yield. The lender determines the method from its criteria, property size and property classification. Confirm the intended basis before relying on a refinance figure.
The bricks-and-mortar method compares the property with similar residential sales and its physical attributes. The income method divides annual gross or net rent by a market yield. For this article's sensitivity, use the net-rent output from the worked example.
## Use the income calculation as a sensitivity
The calculation path is:
**Income indication = selected annual gross or net rent / market yield**
Treat the result as a sensitivity rather than a promised valuation. Record the net-rent and yield inputs beside each result, and keep the lender's valuation decision separate from the screening calculation.
## Work from net rent
Use the [gross and net yield calculator](/tools/gross-net-yield-calculator) with the controlled inputs: GBP 180,000 price, GBP 18,000 annual rent, 10% management, 5% maintenance, GBP 600 insurance, 5% void allowance and GBP 600 other annual costs.
The outputs are GBP 4,800 annual operating costs and GBP 13,200 net rent before borrowing. Gross yield is 10%, while net yield before borrowing is 7.33%. To create an income-value sensitivity, divide the GBP 13,200 net rent by a market yield supported by current professional evidence.
The calculator is a screening view. It does not model lender stress, finance, tax or after-tax cash flow. Test finance separately in the [buy-to-let stress ICR calculator](/tools/buy-to-let-stress-icr-calculator).
Its gross-yield formula divides annual gross rent by the capital base. Its net-yield formula deducts void allowance, management and fixed annual costs before dividing net operating income by the same capital base. Preserve both outputs so the income sensitivity does not use gross rent as though it were net income.
## Include licensing and operating evidence
GOV.UK says an HMO has at least three tenants forming more than one household who share facilities, and [large HMOs need a council licence](https://www.gov.uk/private-renting/houses-in-multiple-occupation). The [HMO management regulations](https://www.legislation.gov.uk/uksi/2006/372/contents) set duties for safety, services and living accommodation in England.
The Bricks & Yield [HMO licence and evidence pre-check](/tools/hmo-licence-evidence-pre-check) tracks council checks, room standards, facilities, fire safety, planning, certificates and room-rent evidence. It states that council schemes and planning rules determine the live property-specific answer.
The pre-check uses planned occupants, households, shared facilities and rent-paid assumptions to screen whether an HMO definition or mandatory licence may be relevant. It remains a screening step, so the council and planning evidence stay with the valuation pack.