Investing in Houses in Multiple Occupation (HMOs) has become an increasingly popular strategy among UK property investors—and for good reason. HMOs can generate significantly higher rental yields compared to traditional buy-to-let properties. But with higher returns come more responsibilities, regulations, and risks.
Whether you’re a seasoned investor or just starting out, this guide will walk you through the essentials of investing in HMOs in the UK—from understanding what HMOs are, to finding the right property and navigating the legal landscape.
What is an HMO?
An HMO is a property rented out by at least three people who are not from one household (e.g., a family), but share facilities like the bathroom or kitchen. These tenants are typically students, young professionals, or low-income individuals.
Types of HMOs:
Small HMO: 3-4 tenants forming more than one household.
Large (Licensable) HMO: 5 or more tenants, forming more than one household, sharing facilities.
Why Invest in HMOs?
✅ Higher Rental Yields
Because you’re renting rooms individually, HMOs typically generate more income than single-tenancy buy-to-let properties.
✅ Spreading Risk
With multiple tenants, the impact of one tenant moving out is reduced.
✅ High Demand
In university towns or large cities, HMOs are in strong demand among students and professionals.
What to Consider Before Investing
1. Licensing & Regulation
Mandatory Licensing is required for large HMOs in England and Wales.
Additional or Selective Licensing may apply in some local council areas.
You’ll also need to comply with health and safety regulations, including fire safety, minimum room sizes, and amenities.
👉 Always check with your local council to understand specific HMO requirements.
2. Location
Not all areas are suitable for HMOs. Look for:
Cities with universities or large student populations
Employment hubs with transient workers
Transport links and local amenities
3. Financing
HMO mortgages differ from standard buy-to-let loans:
Typically require a larger deposit (25%+)
Stricter lending criteria
Often assessed on rental income potential
Work with mortgage brokers who specialise in HMO lending.
4. Property Layout and Conversion
The layout must be suitable for multiple tenants:
Sufficient bathrooms and kitchens
Fire doors and safety measures
Space for communal living
Individual locks on bedroom doors
You may need to apply for planning permission, especially for large HMOs (Use Class C4 to Sui Generis change).
5. Management
Managing an HMO can be intensive:
More tenant issues to deal with
Higher turnover
Regular maintenance
You can self-manage or hire a letting agent with HMO experience. If you go the DIY route, make sure you’re fully up to speed with legal responsibilities.
Steps to Start Investing in HMOs
Step 1: Research the Market
Use property portals, local council data, and landlord forums to understand demand and competition.
Step 2: Create a Business Plan
Factor in refurbishment costs, licensing fees, ongoing maintenance, void periods, and projected income.
Step 3: Secure Financing
Get pre-approved for HMO lending and understand the lender’s requirements for the property.
Step 4: Purchase and Convert
Buy a suitable property and carry out necessary conversions to meet legal standards and appeal to tenants.
Step 5: Get Licensed and Compliant
Apply for the appropriate HMO license, carry out safety checks, and ensure you’re compliant with all regulations.
Step 6: Market and Manage
Find suitable tenants and either self-manage or appoint a reputable HMO letting agent.
Common Pitfalls to Avoid
Underestimating compliance costs
Buying in areas with low demand
Poor tenant vetting
Ignoring fire and safety requirements
Inadequate insurance cover (standard landlord insurance may not be enough)
Final Thoughts
HMO investing can be highly rewarding but is not for the faint of heart. With careful planning, legal compliance, and the right property, it can provide robust cash flow and long-term capital growth. Always do your due diligence and consider speaking with a financial advisor or property expert before diving in.
