When investing in rental properties, one of the biggest decisions landlords face is whether to opt for a House in Multiple Occupation (HMO) or a single-let property. Both strategies offer distinct advantages and challenges, and the right choice will depend on factors such as location, management capacity, and financial goals. Understanding the differences can help landlords make an informed decision about which investment suits their needs best.
What is the Difference Between an HMO and a Single-Let?
A single-let property is the most traditional type of buy-to-let investment, where a landlord rents an entire house or flat to a single household—usually a family, couple, or individual tenant. The rent is typically charged as a fixed monthly amount, and the tenant is responsible for covering their own bills, such as council tax, utilities, and internet.
A House in Multiple Occupation (HMO) is a property rented out to multiple tenants from separate households who share communal spaces such as kitchens and bathrooms. This is common in student housing, shared professional accommodation, and low-cost housing for workers in expensive cities. HMOs are subject to additional legal and licensing requirements due to the complexity of managing multiple tenants under one roof.
Which Investment Generates More Profit?
In general, HMOs tend to deliver higher rental yields than single-let properties because rent is charged on a per-room basis rather than for the entire property. A landlord renting a three-bedroom house to a single tenant may receive £1,200 per month, whereas renting out the same property as an HMO—by converting the living room into a fourth bedroom—could generate £500 per room, totalling £2,000 per month.
However, while the headline rental income is higher for HMOs, they also come with increased expenses. Utility bills, council tax (if not covered by tenants), higher maintenance costs, and stricter compliance requirements can reduce overall profitability if not carefully managed.
Single-lets, on the other hand, typically provide more stable income with fewer vacancies. Tenants tend to stay longer, meaning less turnover and lower management costs. Additionally, mortgage lenders often view single-lets as lower-risk investments, meaning interest rates and deposit requirements may be more favourable compared to HMOs.
Pros and Cons of HMOs
Pros:
- Higher rental yields due to multiple tenants paying rent per room.
- Reduced risk of complete rental voids, as income still comes in even if one room is vacant.
- Strong demand in urban areas, particularly from students and young professionals.
Cons:
- More complex management due to multiple tenants with different needs and schedules.
- Higher initial costs for licensing, compliance, and potential property modifications.
- Stricter legal requirements, including fire safety regulations and HMO licences in many areas.
Pros and Cons of Single-Lets
Pros:
- Easier to manage, with fewer tenants and lower maintenance issues.
- Lower initial investment, as there are no HMO conversion or licensing costs.
- Longer tenancy periods, leading to lower turnover costs and more predictable income.
Cons:
- Lower rental yields compared to HMOs.
- Risk of total rental voids, as a single tenant leaving means 100% of rental income is lost.
- Limited flexibility in adjusting rent compared to room-by-room rentals.
Which Strategy is Right for You?
Choosing between an HMO and a single-let depends on your investment goals, risk tolerance, and management capacity. If you are looking for higher rental income and are comfortable with increased management responsibilities, an HMO could be a lucrative choice—especially in high-demand areas like university towns and major cities. However, if you prefer a lower-maintenance, hands-off investment with more stable tenancies, a single-let may be the better option.
