Owners of London HMOs rarely put them up for sale, meaning investors likely need to convert a residential home into an HMO to get into the market.
The research comes from property lender Octane Capital which has compiled data on the levels of HMO stock across different regions of England, as well as the amount being sold.
London has by far the most HMOs in England, reflecting the fierce nature of the rental market in the capital. Across the capital there are some 83,900 HMOs, accounting for 38.7 per cent of the total in England.
However a very small proportion are actually for sale, as just 164 are currently listed on the market, a ratio of just 0.2%.
Properties split into different units are ideal for investors looking for a stronger return.
Previous Octane research found that HMOs housing four tenants typically net investors a monthly rent of £593 per room or £2,372 per month. This brings average yields to 8.1 per cent, surpassing the 4.4 per cent achieved on a regular four bed property.
However finding a home that already operates as an HMO listed for sale can be challenging, even outside London. Indeed, across England only 1.6 per cent of the nation’s 217,000 HMOs are currently listed for sale.
If you’re an investor looking to purchase an HMO you’ve got a strong opportunity to find one for sale in the South East, where there are currently 654 listings, more than any other region, accounting for 19.4 per cent of all current HMOs listed for sale.
The North West also ranks high in this respect with some 507 HMOs currently on the market, accounting for 15.1 per cent of national stock for sale, with the East Midlands ranking third with 448 current HMOs on the market.
“London is by far the toughest region when it comes to finding a ready made HMO for sale. Yes, it may have a hefty supply of stock, but owners of HMOs are seemingly in it for the long haul in the capital, and are showing a lack of appetite to sell. As a result, you’re better off buying a residential or commercial property and converting it into an HMO in London, despite the challenge of gaining permissions” explains Jonathan Charles, chief executive of Octane.
“Finding an HMO for sale can often feel like looking for a needle in a haystack, but you’ll have an easier time if you stick to regions like the South East, the North West and the East Midlands.”
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