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HMOs are the most profitable property investment

Buy-to-let landlords seeking high returns should consider investing in Houses in Multiple Occupation (HMOs) which continue to outperform standard buy-to-let properties, according to Multi-Let UK.

A new report from the company, which specialises in managing and operating HMO portfolios, shows that the average gross return before voids and maintenance on capital for HMOs over the last five years has, based on Multi-Let UK data, increased by an average of 18%-20%, compared with an average gross return of 6%-8% for standard buy-to-let.

Investing in an HMO generally requires a higher initial capital investment than a standard buy-to-let property, but Multi-Let UK reports that HMO investors in the main have received a considerably higher return over the last five years – an average of £600 on every £1,000, applying a gross return to both.

Daniel Hill, managing director of Multi-Let UK, who last week wrote an exclusive article for Landlord Today readers explaining how landlords can build a high yielding HMO portfolio, commented: “Whilst the market conditions in many areas are becoming more developed and competitive, a HMO property with the correct scheme and management can deliver landlords and investors an average gross yield of 10%-13%, leveraged return on investment of 18% plus, before voids and maintenance. These yields are much higher than standard single let rental property, which are achieving average yields of between 4-8% subject to location.

“HMO properties can generate this significant increase in revenue because they are rented out to individuals, on a room by room basis. HMOs often provide between four and ten rooms, rented to individual tenants. Rent will typically include the internet, general utility bills and council tax. Whilst the individual bedrooms are rented as private for exclusive use, most HMOs have communal areas, including kitchen diners and lounges.” 

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