Market Updates

Dean Parata

Managing Director

May 18, 2022

4 Minute Read

Alright, it’s no secret that we’re fans on HMO’s. This isn’t for no reason though. With a growing population and housing crisis, HMO’s are the perfect solution to the UK’s housing shortage.

We’ve all heard it - that infamous song … “I’m bulletproof, nothing to lose, fire away, fire away …” This really could be the theme song for describing how great a HMO is as an investment strategy! Acute property investors and landlords are increasingly becoming aware of this. Ranging from shared housing to student accommodation, these prove to be lucrative options. They provide the highest rental yields on the market, plus, affordable housing has been under high demand. Great news for investors who want to fill their rooms easily!

Here is why Parata Property’s experts believe HMO’s are a bulletproof investment strategy!

1. Higher Rental Yields

By comparison, the HMO rental yield exceeds that of a buy-to-let (BTL) property. This is  because the rent for a BTL property is charged on a monthly basis, depending on the property value. However, if the property was a HMO, the landlord could charge on a per room, per week basis. A single let is around 5% and 7%, whereas the gross rental yield for a HMO impressively  lies somewhere between 8% and 12%!

Consider this example: Suppose a four-bed house is used as a single BTL. In that case, it could achieve a rent of roughly £700 a month, however, if this same property was let as an HMO, it could see £85 per room, per week as rent. That equals a monthly rent of £1473 a month! Whilst HMO mortgages may be slightly more expensive, and there are bills to cover, it is clear that increased rental yield counters both these factors.

One of the best things about HMO’s is that it is highly unlikely that the property will stay empty for long! Suppose if one tenant leaves, there may still be, say, three others residing. In that case, the rental income sees a plunge of only 25%! Again, as already stated, the high demand for affordable accommodation means that this will likely not be the case for long!

Shortage of accommodation and guaranteed rent

It is no secret that there has been a shortage of affordable accommodation options in the United Kingdom. This chronic housing shortage is one of the biggest challenges faced by the nation. In response, the government has set out to construct around 300,000 new houses each year in an attempt to keep housing costs affordable and match the mounting pressure!

With all this in mind, affordable housing options are absolutely essential! This is particularly the case across the North West of the UK, where demand is only continuing to spike.  HMO’s are effective in responding to this shortage and increased demand. Hence, a very popular investment option in the region!

But not only across the private sector is there increased demand. Arguably, the public sector in the shape of local council authorities are increasingly struggling to find enough suitable accommodation for a variety of tenant types. Whether these are asylum seekers, local housing authorities or emergency housing tenants, demand remains high and supply  low. As an investor you couldn’t ask for a better set up! Guaranteed rent, no voids, bills and maintenance covered for the duration of the lease - talk about an investors dream!

An ideal option that supports a flexible lifestyle

For tenants, HMO’s prove to be an ideal accommodation option for all those seeking a more flexible lifestyle. As many people are choosing to focus on their careers, the choice to start a family is often delayed. Investors can strategically target individuals who have a more disposable or expendable income by catering to the need for a more flexible approach to housing and remove the additional burden of bills that a traditional lease carries . Additionally, HMO’s typically come with shorter leases in comparison to traditional BTL properties. So this again proves to be a major plus when looking for the best investment option.

HMO’s are a strategic and bulletproof investment strategy that prove over and over to be more profitable than regular BTL investments. The high rental demand throughout the UK and  low-interest rates means that  landlords can maximise their rental yields!  Why not generate multiple income streams via a single investment with an HMO?!


To our market leading market updates.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Ready to start your HMO