London HMOs: A rare and lucrative investment opportunity

London HMOs: A rare and lucrative investment opportunity

0:03 AM, 2nd November 2023, About 9 months ago

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If you are a landlord or investor looking for a high-yield property investment in London, you may want to consider buying a house in multiple occupation (HMO).

However, you may also face some difficulties in finding one, as a new study shows that London HMOs are rarely put up for sale.

According to Octane Capital, a specialist property lending firm, London has the largest number of HMOs in England, with 83,900 properties that are split into different units for rent.

This represents 38.7% of the total HMO stock in England, reflecting the high demand for affordable accommodation in the capital.

‘Finding a ready-made HMO for sale’

Octane’s chief executive, Jonathan Samuels, said: “London is by far the toughest region when it comes to finding a ready-made HMO for sale.

“Yes, it may have a hefty supply of stock, but owners of HMOs are seemingly in it for the long haul in the capital and are showing a lack of appetite to sell.

“As a result, you’re better off buying a residential or commercial property and converting it into an HMO in London, despite the challenge of gaining permissions.”

He added: “Finding an HMO for sale can often feel like looking for a needle in a haystack, but you’ll have an easier time if you stick to regions like the South East, the North West and the East Midlands.”

London HMOs currently on the market

However, there are only 164 London HMOs currently on the market, which means that only 0.2% of the capital’s HMOs are available for purchase.

This suggests that owners of HMOs in London are holding on to their assets for the long term and are not willing to sell them easily.

Octane also found that HMOs offer much higher returns than regular properties, especially for investors who can convert a residential or commercial property into an HMO.

HMOs can generate an average monthly rent of £2,372

The firm’s previous research showed that a four-bedroom HMO can generate an average monthly rent of £2,372, or £593 per room.

This translates to an average yield of 8.1%, compared to 4.4% for a regular four-bedroom property.

Finding an existing HMO for sale is not easy in any region of England, as only 1.6% of the nation’s 217,000 HMOs are currently listed for sale.

The South East has the most HMOs for sale, with 654 listings, followed by the North West with 507 listings, and the East Midlands with 448 listings.

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