HMOs can generate significantly more income than single lets — but they come with extra complexity. We compare the two strategies to help you decide.
House of Multiple Occupation (HMO) properties are increasingly popular among landlords seeking to maximise returns from their property portfolio. But are they always the right choice compared to a simple single let? Here's an honest comparison.
The income advantage of HMOs
An HMO's income advantage over a single let can be substantial. A three-bedroom house in Essex let as a single tenancy might achieve £1,100-£1,300 per month. The same property let as an HMO to three individual tenants might generate £350-£450 per room — potentially £1,050-£1,350 from three rooms, but with the flexibility to add additional rooms or increase individual room rents as demand allows.
For a five-bedroom HMO, the difference becomes more dramatic. Individual rooms at £400-£500 each generate £2,000-£2,500 per month, compared to perhaps £1,400-£1,600 for the same property as a single let.
The complexity of HMO management
These higher returns come with greater complexity. HMOs require mandatory licensing in most circumstances, compliance with HMO Management Regulations, more intensive tenant management (multiple individuals with potentially conflicting needs), higher maintenance costs from greater usage and wear, and more complex utility and bill management.
Licensing costs
HMO licence fees vary by local authority but typically range from £500 to £1,500 for a 5-year licence. Additional licensing schemes can add further costs. These should be factored into your yield calculations.
The right management approach
Self-managing an HMO is significantly more demanding than managing a single let. Many landlords who switch to HMOs without professional management support find the additional complexity absorbs much or all of the extra income.
Our specialist HMO management service handles all aspects of operating your HMO — from licensing to individual room management — allowing you to enjoy the enhanced returns without the enhanced workload. Contact us to discuss your HMO investment plans.