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HMO's: Price, Regulations and What You Need to Know.

Updated: Nov 26, 2020

HMO's (House's of Multiple Occupancy) can yield great returns if run correctly. Many people like the idea of having such a great cash-flowing investment in their portfolio, but many are uncertain of the costs. So how much does it actually cost to purchase a HMO?

Purchase Price

Of course this does depend on the area and the condition of the property but on average you can look to pay anywhere between 180K-400k. HMO's are worth more than single lets especially if they already have a HMO licence. They are also going to have more rooms and be more spacious as they are designed for co-living.

If you are not purchasing the property with cash and paying for it all in one go, then you will most likely be using a mortgage or loan. Most lenders will require a deposit of 25% of the purchase price on a buy to let mortgage. However, if you plan on raising the value of the property by refurbishment you might opt to use a bridging loan. A bridging loan usually requires around 30% of the purchase price, and usually have a higher interest rate than buy to lets.

Legal Fees and Broker Fees

Depending on how you're funding the property, you might want to use a mortgage broker. Paying for a decent mortgage broker can be advantageous as they can secure you better interest rates on a mortgage or loan. They can usually charge anything from around £500-£1,000. Next, you will then need a solicitor which depending on the company or individual can range from anything between £500-£1,500.

Depending on the condition of the property you will also need a survey on the property. A home survey is generally cheaper than a full building survey, however if the property is in dire need of refurbishment and is in poor condition you are going to need a full building survey. Surveys can range from around £300-£600 depending on the surveyor.

Stamp Duty

As many of you know, if you own any properties already you will have to pay stamp duty.

Properties under 125,000 will require a 3% stamp duty surcharge. Properties over 125,000 will require more. If you are also purchasing through a ltd company you will have to pay stamp duty despite not owning any property.

'You usually pay Stamp Duty Land Tax (SDLT) on increasing portions of the property price above £125,000 when you buy residential property, for example a house or flat.There are different rules if you’re buying your first home and the purchase price is £500,000 or less.'

Planning and Licensing

Nearly all HMO's nowadays require a HMO licence. When you purchase a HMO, you will be required to apply for new license for the property under your ownership. If the property has/is already a HMO then it may just be a case of a renewal, and no planning permission will be required. However, if you are converting a residential property into a HMO, you will be required to apply for planning permission from article C3-C4. This usually costs around £350 for planning and £525 for the license itself, which will last for 5 years. It is also very important to consider the area in which you are purchasing a HMO. Big cities such as London are considered what is called an article 4 area. This means that there are currently too many dwelling HMO's in the area, and your planning permission will most likely be rejected if you are planning on converting a residential property to a HMO. Do your research!


Depending on the state of the property you have purchased you may decide to refurbish it. Perhaps a new kitchen or a new bathroom to update the property. Remember, the higher standard of your HMO, the more rent you could potentially charge your tenants, and the more appealing your property will be. All HMO's must be fire safety regulated. This means that fire doors will be required on all entrances and exits, as well as on all of the bedroom doors. Fire alarms will also need to be installed throughout the property and you will require a gas and electricity certificate annually. Depending on how many bedrooms the property holds, a certain amount of bathrooms are also required. Roughly it's a bathroom for every three tenants; i.e A five bedroom HMO will need to have 2 bathrooms, and the property will also need to be over 3 floors. There is also a size limitation on the bedrooms. Legally, a bedroom must be within 6.51 square meters to be rented out to a tenant.

The price of refurbishment of course varies depending on what the property needs. You might find you only need a bit of cosmetic refurb i.e. painting, tiling which could cost you very little. Or, you might want to strip the whole place and modernize it throughout, installing new kitchens, flooring, bathrooms ect, which could cost you anything from £6,000-£30,000 depending on the size of the place.


Once you have refurbished or touched up the place and it's ready to go, you will need to pay maintenance fees per month. You might want to send cleaners in weekly or monthly to make sure your property is well looked after. The average cleaning fees in the UK are around £15 per hourly rate.

Furthermore, you will need to consider whether you want your tenants to pay their monthly bills, council tax (if professionals) and WIFI costs themselves, or, if you want to include these costs in their monthly rental payments.

Due to the fact you will have multiple tenants living in the property, you must also consider that there will be an increased risk to damage of the property. Taps, dishwashers, washing machines and so on will be used more frequently due to the number of people using them, so they may not last as long as you expected and will need replacing over time.

Agency Fees

Many Landlords choose to use an estate agent to manage their property. Advantageously, this means you as a Landlord will get to sit back and take a hands-off approach. The estate agent will find all of your tenants, will provide a locksmith if a tenant accidentally lost their key or locked themselves out, and will be able to deal with any issues the tenant has. However, this does come at a price. An estate agent will generally require a 12-15% of your profit margin depending on the agent.

Of course many Landlords will choose to manage their HMO's themselves. it can be preferable to find your own tenants rather than relying on an estate agent. It's rewarding as you are able to show the tenants around the property yourself, show them your hard work if you have recently had the property refurbished and get an idea what kind of a person they are. You will also of course avoid paying those 10-12% agency fees! However, there is of course a downside, as if anything goes wrong, it will be YOUR mobile phone that your tenants will be ringing in the middle of the night!

Overall, HMO's can be a costly investment. But, if you have the funds and the time to invest, it can be extremely rewarding passive income.

I hope I have furthered or refreshed your knowledge on HMO's. Thanks for giving this post a read!


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