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Some of our recent market updates have mentioned the increased importance of Houses in Multiple Occupation – or HMOs – in the lettings industry at the moment, but what exactly are they?

What makes a property an HMO?

A home is counted as an HMO if there are at least three tenants living there, sharing the same kitchen and/or bathroom facilities and forming more than one “household”. A household is either a single person or members of the same family – including couples, grandparents, aunts and uncles, siblings and step-children.

For example, three brothers living together would count as one household, and a property they lived in wouldn’t count as an HMO. However, if they also lived with a friend, there would be two households living in the property and it would then count as an HMO.

HMO properties are categorised as “Large HMOs” if five or more tenants from more than one household are living there and sharing kitchen and/or bathroom facilities.

Why are they important in the lettings market at the moment?

Traditionally, HMO properties have been a staple of the student lettings market. Many student properties are large homes which have been converted to maximise the number of available bedrooms, to enable big groups of students to live together. As it is uncommon for these students to be related, each individual student counts as a separate household and as a result the properties they inhabit tend to be HMOs.

In recent years, however, HMOs have become increasingly common outside of the student market. The proportion of young professionals in the rental market has been steadily growing, and many of these individuals favour this type of property – either because they want to live with friends or because they cannot afford to rent alone.

As a result, HMO properties fill a gap in the market, reducing the cost of renting for growing numbers of young tenants who would otherwise struggle to find somewhere suitable to live.

Why are they good for landlords?

Due to the increasing demand for these properties, the rental yields they offer are often higher than smaller properties. According to the National Landlords’ Association (NLA), the average rental yield for an HMO property is 6.9%. Seasoned property investors will tell you that this is a very good return indeed, especially considering that non-HMO properties average a yield of 5.6%.

The other main advantage of HMO properties for landlords is that they can reduce the risk of void periods. HMO tenancies are often long-term, and if the rooms are let on an individual basis it becomes extremely unlikely that the property will ever be completely empty, meaning that the landlord will always be getting at least some rental income.

Is there anything else a landlord of an HMO property needs to consider?

Most HMO properties – and all Large HMO properties – will require a licence, which can be obtained from the local council. This licence will be valid for a maximum of five years so you may need to renew this during a tenancy if it is still ongoing when your licence expires.

The local council will also require some safety measures to be in place. The property must be suitable for the number of occupants who will be living there – depending on the size, it may need a certain number of bathrooms, for example – and you’ll need to install and maintain smoke alarms, provide a gas safety certificate every year, and provide safety certificates for electrical appliances if they are requested.

The council will also require the property to be managed by someone considered “fit and proper” to look after it. This could be you as the landlord, or a managing agent if you choose to instruct one. Whoever it is, they may need to prove they have no criminal record, and have not breached landlord legislation or codes of practice.

Finally, if your property is a flat, it is worth checking your building rules to make sure that HMO properties are allowed, as some buildings have maximum occupancy restrictions. If you aren’t sure, you should speak with your building manager or your managing agent if you have one.


If you haven’t yet purchased a property but are considering buying an HMO as an investment, you should check that the property would be able to qualify as an HMO before buying it, and that there are no restrictions to occupancy which might prevent it from bringing in a good rental yield.

You should also be aware that as HMOs tend to be larger properties, they may be more expensive than a traditional rental investment and may require more maintenance, so might not be suitable for an inexperienced landlord.


If you are thinking of letting out your property as an HMO, but don’t want the hassle of ensuring that you are compliant with the regulations which surround them, our Prime department can help. They specialise in providing services and sourcing tenants for HMO landlords, and you can read more about them here.

This is part of our series of FAQs. You can read the others here: Applying for a Mortgage - CredasEnergy Performance CertificatesExperian - Nil Deposit Scheme
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