Tips For Creating a Profitable HMO

Portrait Of Group Of Smiling College Students Outside Rented Shared House

Landlords and property investors are increasingly being drawn to HMO properties given their potential for high yields and high occupancy rates. Demand for such properties, which is already impressive in university towns, is set for even further growth following the Government’s recent introduction of the ‘Graduate Route’.

But what should potential property investors focus on when investing in HMOs? We’ve compiled these tips to ensure you receive the best return on your investment.

Location is Key

Students and young professionals are the group most likely to rent an HMO. It should therefore be obvious that the best area to invest in HMO properties is in popular university cities, such as Liverpool, Manchester and Salford. The property should be within easy reach of the university campus, transport and local amenities such as shops, bars and nightlife. Look for properties in areas which already have a high density of student renters. Other students will want to live in these areas so that they can be close to their friends and those with similar lifestyles and interests.

At Henry Clare we can help investors source high-yielding properties suitable for the student market.


Investors and landlords should consider how many tenants they wish to accommodate in each of their properties. In a property with fewer tenants, quality of life will be better. There should be fewer disagreements between housemates and therefore less chance of a tenant leaving your property. The number of maintenance issues should also be reduced. However, by having more tenants, rental yield increases and if one tenant leaves the property, the effect on your income is less noticeable.

Room size is also crucial. Investors should research the HMO market and associated legislation thoroughly before entering the market. There are minimum sizes for rooms in HMOs of which landlords need to be aware. They will not be able to obtain an HMO licence if rooms do not meet these requirements.

High Returns

Investors should always ensure that the expected rental yield on a property is suitably high before making a purchase. Easily calculate the rental yield by taking the annual gross income and dividing this figure by the purchase price plus the costs of refurbishment. If purchasing a property which has already been converted into an HMO, but which does not currently produce a high rental yield, investors should research what can be done to address this issue before committing to a purchase.

Henry Clare seeks to achieve a combined yield of 13% on all properties (8% rental yield + 5% capital yield).

High-end HMOs

The demand for high end accommodation is at an all-time high. Investors and landlords should now consider furnishing their properties to a far higher spec than they might have done in the past. This could include the provision of ensuites, TVs, superfast internet and high quality beds and sofas. Such activity will encourage higher rents and may also attract an easier to manage, higher quality of tenant.

Look for Older Properties

Whilst older properties may be more expensive to maintain, they tend to be much larger than modern properties. They are therefore perfect for HMOs. Unused storage and communal spaces can be converted into more rooms which can then be rented to a greater number of tenants. Ensuites can also be added to some of the larger rooms.