Calculate gross and net yield for a House in Multiple Occupation. Enter room rents and all running costs to see your true return on investment.
Property & Room Details
Annual Running Costs
Gross Yield
Net Yield
Income & Profit
vs Single-Let Equivalent
Section 24 note: Mortgage interest is not fully tax-deductible for individual landlords. You receive a 20% tax credit only. For a higher-rate taxpayer, the effective tax cost is significantly higher. Consider using a limited company structure if mortgage finance costs are large.
HMO Returns vs Single-Let Property
HMOs (Houses in Multiple Occupation) consistently generate higher rental yields than equivalent single-let properties. A typical 5-bedroom HMO can achieve 8–12% gross yield versus 3–6% for a single-let, because each room commands its own rent. However, running costs are significantly higher due to utilities, council tax, HMO licensing, and higher management fees.
Metric
HMO
Single Let
Gross Yield
8–15%
3–6%
Net Yield
5–10%
2–4%
Management intensity
High
Low–Medium
Licensing requirement
Yes (mandatory for 5+ tenants)
No
Frequently Asked Questions
What is an HMO property?
An HMO (House in Multiple Occupation) is a property rented by three or more people not from the same household who share facilities. Mandatory licensing applies to 5+ people from 2+ households.
What is gross yield for an HMO?
Gross yield = (Rooms × Monthly Rent × 12 × (1 − Void Rate)) ÷ Property Value × 100. HMOs typically achieve 8–15% gross yield vs 3–6% for single-let properties.
What is net yield for an HMO?
Net yield = (Gross Income − All Running Costs) ÷ Property Value × 100. Net yield for HMOs is typically 5–10% after all expenses.
Do I need an HMO licence?
Mandatory HMO licensing applies to properties with 5+ people from 2+ households. Many councils also operate additional licensing schemes for smaller HMOs. A licence typically costs £500–£1,500 for 5 years.
What is the typical void rate for an HMO?
A typical void rate allowance is 8–10%, equivalent to around 4–5 weeks per room per year. Because rooms are let individually, HMOs have lower overall void exposure than single-let properties.
How does Section 24 affect HMO landlords?
Section 24 means individual landlords can no longer deduct mortgage interest from rental profits. They receive a 20% tax credit only on mortgage interest, significantly increasing the tax burden for higher-rate taxpayers.
What running costs should I budget for an HMO?
Typical HMO costs include: mortgage interest, council tax, all utilities, HMO licence (~£100/year), letting agent fees (10–15% of rent), insurance (£600–£1,500/year), and maintenance (5–10% of gross rent).
Is an HMO more profitable than a single let?
HMOs typically generate 2–3x the rental income of a single-let property of equivalent value. However, running costs are also significantly higher due to utilities, council tax, licensing, and greater management intensity.
What letting agent fees apply to HMOs?
Letting agent management fees for HMOs are typically 10–15% of gross monthly rent, higher than single-lets (8–12%), due to the increased management workload.
What is cash-on-cash return for an HMO?
Cash-on-cash return = Net Annual Income ÷ Cash Invested (deposit + buying costs) × 100. For a mortgaged HMO, cash-on-cash returns of 10–20% are achievable in high-demand areas.
What HMO insurance do I need?
You need specialist HMO landlord insurance covering buildings, public liability, loss of rent, and possibly contents. Expect to pay £600–£1,500 per year for a 5–6 bedroom HMO. Standard landlord insurance does not cover HMOs.
Can I convert a standard buy-to-let into an HMO?
Yes, but you may need planning permission for a change of use (C3 to C4) and must comply with HMO regulations on room sizes, fire safety, and amenity standards. Check with your local council before converting.