27 February 2017
27 February 2017,

Investing in an HMO property in the UK can be highly lucrative. With more available rooms to rent, monthly yield is increased, and overall ROI is boosted. However, running an HMO isn’t as straightforward as a simple buy-to-let property – and it’s important to be aware of the potential pitfalls.

Here’s some more information.

The Advantages of HMOs

  • More money. If you’re looking for a buy-to-let property for sale that offers maximised monthly payments, an HMO is the ideal solution. In some cases, HMO properties can generate three times as much rental yield as standard buy-to-lets, which is a big difference. Cash-flow is improved, and your monthly income is significantly higher.


  • Less worry with lack of tenants. If you invest in a straightforward buy-to-let property for sale, and your tenants move out, you’re suddenly left with an empty house, which isn’t generating any money. If one tenant moves out of your HMO, you still have several other tenants that are still paying rent.


  • High demand. Demand for HMO accommodation is particularly high in the cities, as more tenants look for flexible, cost-effective housing. This is especially the case with students and young professionals.


  • Tax benefits. There are a few tax benefits that come with HMO properties – because some of the costs involved are tax-deductible.

The Disadvantages of HMOs

  • If you’re funding your purchase with a buy-to-let mortgage, you need to be aware that HMO mortgages are harder to get. If you’re serious about investing in an HMO, you’ll also need to have a larger deposit.


  • More initial outlay. To get your HMO up and running, you’ll require money to convert the building, plus make any other cosmetic or structural improvements. Make sure you factor these costs in before committing.


  • Reduced capital growth. In some areas, HMOs are highly sought after, which ensures good capital growth. However, there’s a risk that your overall profit might be reduced, as when you sell your HMO on, you’ll be appealing to a niche market – i.e. specialist landlords. Few normal home-buyers are tempted by the prospect of converting an HMO back to a standard residential property.


  • More legislation. There’s more legislation involved with having an HMO, not to mention more planning requirements.

Should You Invest?

When investing in UK property, it’s important to consider finances. However, it’s also vital to consider your lifestyle, and whether you’re happy to commit to the extra work of running an HMO. It’s likely that an HMO property will generate considerably more monthly rent, but there’s a chance you won’t enjoy so much long-term growth, which may impact overall ROI.

If you’re not sure which option is best for you, it’s a good idea to speak to an expert – for example, a property investment agent. They’ll give you the low-down on investing in HMO property, and offer valuable support and guidance too.

The Buy2Let Shop Limited

The Buy2Let Shop team are specialist property investment agents, and over the years, we’ve helped hundreds of investors find the right buy-to-let property for sale for their needs – including HMOs.

If you’d like to find out more about our services, simply visit The Buy2Let Shop website today.

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