HMO
A single property let by the room to multiple unrelated tenants who share kitchen and bathroom facilities. Renting per room maximises gross income versus a standard single let.
Typical ROI
10 to 15% gross yield; 12 to 20%+ cash-on-cash
Timeline
4 to 9 months
Difficulty
Medium – High
Key metric
Yield
Strategy overview
- Buy a property suitable for room-by-room conversion
- Reconfigure into 4 to 6+ (ideally en-suite) letting rooms
- Let each room individually on separate agreements
- Refinance on the higher value to recycle capital where possible
Advantages
- Strong cashflow — well above a single-let equivalent
- Income diversified across tenants, so voids hurt less
- High gross yields
- Scalable and repeatable model
Considerations
- Mandatory licensing for 5+ occupants from 2+ households (many councils run additional/selective schemes for smaller HMOs)
- Article 4 Directions can remove permitted-development conversion rights, forcing a planning application
- Fire safety, room-size and amenity standards to meet
- More intensive, hands-on management and higher turnover
- Specialist finance and, for larger HMOs, commercial (income-based) valuation
Funding options
Specialist HMO/BTL mortgage
Term-hold lending for licensed and unlicensed HMOs.
Term holdCommercial mortgage
For 6+ bed or larger HMOs, valued on income rather than bricks and mortar.
Income-based valuationBridging plus refinance
Bridge for purchase and refurb, then refinance onto a term product (BRR).
Fund the worksIdeal property profile
- 4 to 6+ bedrooms or a layout that easily converts
- Near employment, transport, hospitals or universities
- Generous floor area to hit room-size standards and add en-suites
- Outside an Article 4 area, or already holding the right planning use