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Houses in Multiple Occupation (HMOs) can offer higher rental yields than standard buy-to-lets. But they come with extra rules, more work to manage, and strict property check requirements.
An HMO (House in Multiple Occupation) is a property rented to three or more tenants from more than one household. Comprehensive property checks must meet stricter standards than normal rentals. These tenants share things like kitchens and bathrooms, requiring additional property check compliance.
HMOs make more rental income than single-let homes. This is because you rent by the room. You do not rent the whole property.
But they need:
- A licence in most cases
- Stricter safety standards with regular property checks
- More hands-on work to manage
- Higher costs to convert
- Higher costs to comply with rules
You must know the property check rules, compliance requirements, and money model before putting money into HMOs. Proper property checks ensure your investment meets all legal standards.
HMO Quick Facts
HMO = House in Multiple Occupation
What it means: Property rented to 3+ tenants from 2+ households. They share things (kitchen, bathroom).
Why yields are higher:
- Rent per room beats rent for whole property
- 5 rooms × £425 = £2,125/month
- Single let = £925/month
- Same costs (one boiler, one mortgage, one set of certs)
- More income, like costs = better yield
Why most landlords do not do it:
- Licensing needs (£500-£1,200/year in most areas)
- Higher work to manage (5 tenants vs 1)
- More comprehensive property checks (150+ property check items vs 80)
- Costs to convert with rule needs and property check compliance (£10,000-£25,000)
The data shows: Landlords who get past these hurdles earn 6-9% net yields. Standard BTL earns 3-5%. The extra effort pays off.
HMO Money Model (Why It Pays Well)
Standard BTL Example:
- Property: £180,000
- Mortgage: £135,000 at 5.0% = £562/month
- Rent: £925/month
- Gross yield: 6.2%
- Net monthly profit: £363 (before repairs/voids)
- Net yield: 2.4%
5-Bed HMO Example (Same Property):
- Property: £180,000
- Work to convert: £15,000 (fire doors, extra bathroom, furniture)
- Total put in: £195,000
- Mortgage: £135,000 at 5.0% = £562/month
- Rent: 5 rooms × £425 = £2,125/month
- HMO licence: £100/month
- Higher upkeep: 15% (£319/month) vs 10% BTL
- Higher managing: Self-manage or agent £300/month
- Bills (often included): £200/month
- Gross yield: 13.1% (on £180k property value)
- Net monthly profit: £644
- Net yield: 4.0% (67% higher than BTL)
These numbers use average market rents. In uni cities, worker HMO rents (young workers, not students) reach £475-£550/room. This pushes gross yields to 14-16%.
Three HMO Types (Different Markets, Different Returns)
Type 1: Student HMO
- Tenants: Uni students (18-22)
- Rental period: School year (September-June) + summer lets
- Rent: £350-£450/room/month
- Pros: High demand. Parents often stand as backup. Yearly cycle is easy to predict.
- Cons: Empty summers (unless summer lets). Higher wear and tear. Yearly turnover.
- Yield: 8-11% gross
- Work to manage: High (yearly turnover, upkeep between tenancies)
Type 2: Young Worker HMO
- Tenants: Ages 23-35, stable careers, steady income
- Rental period: 6-12 month deals, often renew
- Rent: £425-£550/room/month
- Pros: Lower turnover. Better property care. Higher rents. Year-round tenants.
- Cons: Harder to fill (smaller market than students). Higher hopes from them.
- Yield: 9-13% gross
- Work to manage: Medium (tenants more sorted, longer stays)
Type 3: Premium House Share
- Tenants: Ages 28-45, high earners (£35k+), company workers
- Rental period: 12-24 month deals
- Rent: £550-£750/room/month
- Pros: Lowest turnover. Best property care. Highest rents. Premium spots only.
- Cons: Limited market (only works in rich areas). Higher costs to convert (premium finish needed).
- Yield: 9-14% gross
- Work to manage: Low (worker tenants, rarely call landlord)
Where most people go wrong: They think all HMOs are "student slums." Premium worker HMOs in the right areas give student-level yields. But with half the work. And three times the tenant quality.
HMO Licensing and Property Checks Needs
As per GOV.UK HMO licensing guidance, you must have a licence for homes that pass certain property checks criteria:
You need a licence in England if:
- 5 or more people live there
- They form 2 or more households, AND
- They share toilet, bathroom or kitchen
Licence Costs and Time:
- App fees: £500-£1,200 (varies by council)
- Lasts: 5 years
- Fines for no licence: Up to £30,000 fine plus Rent Payback Order (tenants can get back up to 12 months' rent)
- Check needs with your local council
Property Checks Needs (council rules vary):
- Fire safety: Fire risk check sets needs (for example, fire doors, alarms meeting BS 5839-6, exit lighting where needed)
- Room sizes: Minimum 6.51m² for one adult and 10.22m² for two adults (law minimum in England)
- Kitchen gear: Enough cooking and food storage for number of people
- Bathroom gear: Usually 1 bathroom per 5 people
- Upkeep standards: Quick repairs, safety needs met, proper upkeep
Note: Some councils also have extra or area-based licensing with more needs. Always verify local property checks needs. Right now, no law says HMOs need EPC C. Most rented homes in England and Wales must be EPC E or above unless exempt.
For full guidance, see GOV.UK's HMO licensing page and talk to your local council for area-based rules.
Costs to Convert and Property Checks Spending
Fire Safety Property Checks (Biggest Cost):
- Fire doors: £150-£300 per door × 5–6 doors = £750-£1,800
- Fire alarm system (linked): £800-£1,500
- Exit lighting: £400-£800
- Fire gear and blanket: £150-£300
- Total fire safety: £2,100-£4,400
Extra Bathrooms (Usually Needed):
- 5+ people need 2 bathrooms minimum
- Basic bathroom install: £3,500-£5,000
- Total bathrooms: £3,500-£5,000
Furniture (If Letting With Items):
- 5 beds: £250 each = £1,250
- 5 desks/chairs: £100 each = £500
- Shared items (sofa, dining table, chairs): £800
- White goods (fridge, washing machine, microwave): £600
- Total furniture: £3,150
Kitchens (Often Needs Upgrade):
- If current kitchen not good enough: £4,000-£8,000 upgrade
- If good enough: £500 for extra items/storage
Total Typical Work to Convert: £10,000-£18,000 based on property
Two HMO Plans (Scale vs Single)
Plan A: Premium Single HMO with Thorough Property Checks
- Buy one property in prime spot (near city centre, transport, jobs)
- Convert to the highest standard (premium finish, ensuite rooms if possible)
- Target young workers
- Charge top rents (£550-£650/room)
- Little work to manage (quality tenants, low turnover)
Returns: 10-12% gross yield, 4-6% net yield Risk: All in one place (one property, one income stream) Time needed: 5-8 hours/month
Plan B: Growing a Portfolio
- Buy 3–5 homes in strong rental areas (may not be premium)
- Convert to good standard (safe, clean, works well)
- Target mix of students and young workers
- Charge market rents (£400-£500/room)
- Use HMO manager expert (£150-£300/property/month)
Returns: 8-11% gross yield, 3-5% net yield (after manager fees) Risk: Spread out (many homes, many income streams) Time needed: 2-4 hours/month (agent handles day-to-day)
The data shows: Plan A gives better returns per property. Plan B builds a larger business. Your choice depends on whether you want one great asset or several good assets.
The Liverpool Case Study
Martin bought a 5-bedroom old terrace in Liverpool for £140,000. He turned it into a worker HMO (young workers, not students) for £14,000 after doing thorough property checks.
Property Checks and Work Included:
- 6 fire doors: £1,200
- Linked fire alarm: £1,100
- Second bathroom: £4,200
- Furniture: £2,800
- New paint: £1,400
- Kitchen upgrade: £2,200
- Licensing and certs: £1,100
- Total: £14,000
Money Results:
- Total put in: £154,000
- Mortgage: £105,000 at 5.2% = £455/month
- Rent: 5 rooms × £465 = £2,325/month
- HMO licence: £90/month
- Managing: Self-managed = £0
- Upkeep: 15% = £349/month
- Bills/broadband: £180/month
- Net monthly profit: £1,251
- Yearly profit: £15,012
- Net yield on total put in: 9.7%
- Cash return on £38,500 deposit: 39%
The twist: Liverpool rental demand grew 28% year-on-year. Martin raised rents to £485/room after 18 months. Tenants renewed at higher rate rather than move. This raised yearly profit to £16,212, a 10.5% net yield.
Also, Liverpool property values rose 6.8% yearly. Martin's £154,000 put in became £175,000 by year 3. Combined yield plus value growth: 16.3% yearly total return. Standard BTL in same area: 8.2%.
What Most HMO Property Checks Guides Miss
The Managing Truth:
- 5 tenants ≠5 times the work. Shared issues affect everyone. Deal with them once.
- Worker tenants self-manage. They rarely call. They solve issues among themselves.
- Student tenants need more help. They call for burnt lightbulbs and minor issues.
- The key: Tenant choice affects work more than property type.
The Empty Room Maths:
- 5 rooms, 1 empty = 80% full (still makes money)
- Standard BTL empty = 0% full (zero income)
- HMO empty risk is lower, not higher (many income streams)
The Exit Plan:
- HMOs with proper papers sell to other HMO buyers. Top prices. Based on income.
- Can turn back to family home. Remove licensing. Sell to people who will live there.
- Best of both: Income whilst holding. Many exit routes.
The real secret: HMOs are not harder. They are different. You trade single-tenant ease for multi-tenant systems. But those systems, once set up, give 60% better returns. Time to manage is like if you target workers rather than students.
What Comes Next
What we have not covered:
- Certain UK cities with the highest HMO yields (Nottingham, Liverpool, Sheffield, Coventry)
- HMO mortgage lenders (different rules than standard BTL)
- Property managing software that tracks HMO rule needs
The question is not whether HMOs are "too hard". They are doable with proper knowledge.
The real question is: Are you willing to spend 20-30 hours learning HMO systems? This learning can help you access 60% better returns than standard BTL.
Here is what every good HMO landlord knows:
The hard parts are your edge. The landlords who master property check requirements and compliance procedures earn extra returns. Why? Because most landlords will not bother with comprehensive property checks.
That extra profit - the effort bonus - is your reward for doing the detailed property checks and compliance work that others will not.
Your BTL portfolio can earn 3-5% net yields. Or you can learn HMO investing and earn 6-9%.
Same money. Same market. Different model. Very different returns.
Expert Advice and Meeting Rules for HMO Landlords
Before running an HMO, always check current laws on GOV.UK and your local council website. Then talk to qualified experts:
- HMO licensing expert or property solicitor - For licensing apps and meeting rules
- Fire safety expert - For fire risk checks and safety system design
- FCA-listed BTL mortgage broker - Check at FCA Register
- Qualified accountant - For tax planning, limited company structures
- RICS-listed surveyor - For property checks and work to convert planning
Needed Property Checks:
- Local Council HMO Licensing - Needs vary by area
- GOV.UK HMO Licensing - National rules
- Gas Safe Register - Yearly gas safety certs
- Electrical Safety First - EICR needs
- Fire Safety Rules - Fire Safety Order 2005
Rule Bodies: FCA | SRA | RICS | HMRC | Local Authority
Check Current Laws: GOV.UK | Legislation.gov.uk | HSE
Disclaimer: This article is for general guidance only. It is not money, legal, tax, or expert advice.
HMO running involves hard legal duties, strict rule needs, and serious money input. Not meeting HMO licensing, property checks, fire safety, and landlord rules can lead to court action, big fines, and Rent Payback Orders.
Every property and case is different. You must get proper expert advice for your own case before running an HMO.
The author and publisher accept no blame for any loss or damage from relying on this info. All info is thought correct when published but may become outdated as laws change.