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D4
HMO Conversion: Yes or No?
HMOs can double yield — and double your compliance burden. When does it make sense?
Compare your options
Convert to HMO
Pros
- Significantly higher yields
- Diversified tenant risk
- Less affected by Section 24 in a company
Cons
- Licensing
- Fire safety capex
- Planning (Article 4)
- Higher management cost
Best for: 3+ bed properties near hospitals, universities, transport hubs.
Keep as single let
Pros
- Simple
- Lower management
- Mortgage friendly
Cons
- Lower yield
- More exposed to Section 24
Best for: Suburban family homes or anywhere demand for HMO is weak.
Worked scenarios
3-bed terrace, £800 pcm AST vs £1,650 pcm HMO
| Option | Outcome |
|---|---|
| HMO | Gross uplift ~£10k/yr; net uplift after costs typically £5–7k. |
| Single let | Lower income but minimal management. |
Decision checklist
- Check whether the area is Article 4 (planning required).
- Check mandatory / additional / selective licensing.
- Get fire safety, gas, electric, room-size requirements.
- Budget for capex (often £5k–£20k).
- Model void rates (typically higher than AST).
Relevant tools
Related guides
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