HMOs offer higher rental yields than other properties, research shows

HMOs offer higher rental yields than other properties, research shows

0:07 AM, 27th October 2023, About 7 months ago 12

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Investing in houses in multiple occupation (HMOs) can be more profitable than non-HMO’s with landlords enjoying nearly DOUBLE the average yield, research reveals.

Octane Capital, a specialist property lending company, analysed the cost and return of converting a four-bedroom property into an HMO across England.

The research found that the average house price in England is £309,616 and the average cost of converting a single room into an HMO is £10,267.

This means that buying and converting a four-bedroom property into an HMO would cost around £350,683.

The firm’s research also showed that the average monthly rent for an HMO room is £593, or £2,372 for a four-bedroom HMO – which is an average yield of 8.1% for an HMO investor, which is much higher than the average yield of 4.4% for a regular rental property.

‘HMOs can make a very worthwhile investment’

Octane’s chief executive, Jonathan Samuels, said: “HMOs can make a very worthwhile investment for those with the capacity to take one on.

“Not only are yields generally higher due to increased rental income, but you also benefit from higher demand from tenants, as well as tenant diversification.”

He adds: “Of course, they aren’t all plain sailing, and not only will an HMO conversion require additional upfront costs, but they tend to come with higher operating costs, as well as a raft of additional compliance and legal obligations.

“However, for those who can successfully negotiate these potential pitfalls, HMO investment is sure to provide a far stronger return than they may otherwise find with a regular rental investment.”

HMOs offer higher yields in all regions of England

The study revealed that HMOs offer higher yields in all regions of England, with the North East topping the table with an average HMO yield of 11.2%.

That is 6.3% higher than the average regular rental yield of 4.9% in the region.

In Yorkshire and the Humber, the average HMO yield is 5% higher than the regular rental yield, while in the East Midlands, it is 4.7% higher.

Even in London, where the gap is the smallest, the average HMO yield is 2.4% higher than the normal rental yield.

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LL Minion

8:44 AM, 27th October 2023, About 7 months ago

probably, but who wants the grief of dealing with nightmare tenants. unless you have all working professionals, dealing with other types is too much hassle. Not for me


8:51 AM, 27th October 2023, About 7 months ago

Sold a HMO recently so glad I did with all the grief (from council) bought a small flat to rent for a proff. couple- Paradise compared the HMO.

So got rid of all the agro from the council licensing clipboard bods sniffing around waiting to slap penalties for minor things.

3/4 bed properties used to offered cheap/affordable accommodation for those graduates starting jobs but now these are becoming scare and costly thanks to Councils greedy stance on additional HMO licensing.


12:41 PM, 27th October 2023, About 7 months ago

Are these gross yields for HMO's being compared with gross yields for non HMO's? Do the HMO rents include utilities?

Non HMO's will be less expensive to run so it would seem sensible to compare net yields.

ChatGPT tells me that in January 2022, the average gross yield for an HMO in England was estimated to be in the range of 6-10% and the average net yield for an HMO was 4-8%. Again it depends on who is paying the utility bills.

It also tells me the average net yield for non HMO properties in England (Jan 2022) was estimated at 3-6%.


23:02 PM, 27th October 2023, About 7 months ago

I had 2 HMO's and gave them up. The tenants constantly harassed me over each others failings. But worse than that, I came to the conclusion that they were impossible to live in, unless you enjoyed all the doors on closers, all the rooms with linked alarms, all the windows bolted shut and in the event of a fire, being sealed in your room while the house burned around you. In my opinion HMOs are unsafe, unsociable and if you're claustrophobic, dangerous for your mental health. I wouldn't live in one.


23:08 PM, 27th October 2023, About 7 months ago

Reply to the comment left by TJP at 27/10/2023 - 23:02
Agree. It’s just OTT regulation for small 3/4 bed HMOs. As LLs we want to rent homes out not rent isolated rooms where they feel like prison cells.

No wonder HMOs are dwindling in supply and therefore rents for low cost rooms is up.


7:30 AM, 28th October 2023, About 7 months ago

Reply to the comment left by TJP at 27/10/2023 - 23:02
I have free swing door closers (used in care homes) which makes the door like a normal door as well as saving your door frames. I also have magnetic hold backs on kitchen and lounge doors so they can stay open (and can be closed if required). This makes the house much more pleasant to live in.

Ian Simpson

7:31 AM, 28th October 2023, About 7 months ago

I had five HMOs and got rid of the lot. Endless problems with drugs, mainly cannabis, tenants fighting each other over their food, the heating controls, etc etc. (like a bunch of children!). Had one who got high on weed and started a campfire in his bedroom... took the roof off but luckily nobody killed or injured. Bloody cannabis! Have had , on average , over twenty years, and five HMOs a yield of about 4%... Mainly due to simple non-payment of rent....!! Also exceptionally high council tax, utility bills, and endless repairs and maintenance. One year we bought THREE Cookers!! Tenants will smash up anything!!
VERY pleased I am out!! Profits now in bonded Whisky!! Yield=16% 0 tax!!


13:06 PM, 28th October 2023, About 7 months ago

Reply to the comment left by JB at 28/10/2023 - 07:30
I'm surprised you managed to get swing doors through the fire regulations. And do anti-fire strips work with swing doors? Same with the magnetic hold backs. How do they work unless someone remembers to close all of them every night. The whole idea of self-closing doors is to eliminate human error, thereby keeping the property 'safe'. I can't believe magnets and swing doors achieve this purpose. In my HMOs the closers and smoke alarms were disabled within weeks by my tenants who were totally fed up with them. I can't believe these regulations were brought in after consultation with landlords.


16:52 PM, 28th October 2023, About 7 months ago

Reply to the comment left by TJP at 28/10/2023 - 13:06
They are 'free swing' doors not swing doors ie they are a more expensive type of door closer on a normal fire door. All are connected to the main alarm system which closes them if the alarm goes off. Same with the magnets which hold back a normal fire door with a closer on it

Ian Narbeth

17:00 PM, 28th October 2023, About 7 months ago

I have had HMOs for 10 years. The yields are definitely higher than single BTLs. They are much more management intensive and yes, we have had to deal with tenants falling out with each other. There is much more regulation but if you are willing to invest to provide high quality accommodation, the business model works. We joined Platinum Property Partners who provide ongoing support and advice and also a community of like-minded landlords.

If anyone is thinking of investing in HMOs and would like more information please message me.

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