London's HMO landlords are playing the long game

Finding a ready-made HMO for sale in the capital can prove more than challenging, as they rarely come up for sale, meaning investors likely need to convert a residential home into an HMO to get into the market.

Related topics:  Landlords,  London,  HMO
Property | Reporter
2nd November 2023
HMO flats 545
"You’re better off buying a residential or commercial property and converting it into an HMO in London, despite the challenge of gaining permissions"
- Jonathan Samuels - Octane Capital

New research from specialist property lending experts, Octane Capital, compiled data on the levels of HMO stock across different regions of England, as well as the amount being sold.

London has by far the most HMOs in England, reflecting the fierce nature of the rental market in the capital. Across the capital, there are some 83,900 HMOs, accounting for 38.7% of the total in England.

However, a very small proportion are actually for sale, as just 164 are currently listed on the market, a ratio of just 0.2%.

The appeal of HMOs

Properties split into different units are ideal for investors looking for a stronger return.

Previous research by Octane Capital found that HMOs housing four tenants typically net investors a monthly rent of £593 per room or £2,372 per month. This brings average yields to 8.1%, surpassing the 4.4% achieved on a regular four-bed property.

However finding a home that already operates as an HMO listed for sale can be challenging, even outside London. Indeed, across England, only 1.6% of the nation’s 217,000 HMOs are currently listed for sale.

Where there’s more stock

If you’re an investor looking to purchase an HMO you’ve got a strong opportunity to find one for sale in the South East, where there are 654 listings, more than any other region, accounting for 19.4% of all current HMOs listed for sale.

The North West also ranks high in this respect with some 507 HMOs currently on the market, accounting for 15.1% of national stock for sale, with the East Midlands ranking third with 448 current HMOs on the market.

CEO of Octane Capital, Jonathan Samuels, commented: “London is by far the toughest region when it comes to finding a ready-made HMO for sale. Yes, it may have a hefty supply of stock, but owners of HMOs are seemingly in it for the long haul in the capital and are showing a lack of appetite to sell.

“As a result, you’re better off buying a residential or commercial property and converting it into an HMO in London, despite the challenge of gaining permissions.

“Finding an HMO for sale can often feel like looking for a needle in a haystack, but you’ll have an easier time if you stick to regions like the South East, the North West and the East Midlands.”

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