London stands out as the city with the highest number of HMOs in all of England. Specifically, it boasts a staggering 83,900 HMOs, which translates to a whopping 38.7% of England’s total HMO count. This figure attests to the robust nature of the rental market in the capital.

But here’s the twist: even with such a significant number of HMOs in London, very few of them are up for grabs. The current market lists a mere 164 HMOs available for purchase, which is just 0.2% of London’s total HMO stock. This scarcity means that potential buyers face steep competition and limited choices.

Jonathan Samuels, the chief executive of Octane Capital, sums up the situation succinctly:

“London is the hardest region to find a ready-made HMO for sale. The vast stock might suggest otherwise, but HMO owners in the capital seem committed for the long-term and show little interest in selling.”

His advice for those eager to venture into London’s HMO market? Consider buying residential or commercial property and converting it. However, this alternative approach does come with its hurdles, notably obtaining the necessary permissions for conversion.

Opportunities Beyond London: Where to Look

If you’re set on acquiring an HMO but are flexible about location, some regions offer better opportunities than London.

• South East: Topping the list is the South East, with 654 HMOs currently listed for sale. This region accounts for 19.4% of all the HMOs available for purchase in England.
• North West: Close behind is the North West, where you can find 507 HMOs on sale, making up 15.1% of the national HMOs listed.
• East Midlands: In third place, the East Midlands offers 448 HMOs on the market.

The Allure of HMOs: Strong Returns Await

HMOs have a unique charm for investors, especially when you crunch the numbers. When a property is divided into multiple units, it can yield a more attractive return on investment.

Consider this: A standard HMO with four tenants can generate an average monthly rent of £593 per room. That’s a collective monthly rent of £2,372. As a result, investors can anticipate average yields of 8.1%. This return overshadows the 4.4% yield one would expect from a regular four-bedroom property.

However, there’s a catch. As mentioned, securing an HMO, even outside of London, isn’t straightforward. Just 1.6% of the country’s 217,000 HMOs are up for sale.

In Conclusion

For property investors, HMOs represent a lucrative opportunity, especially in terms of returns. London’s HMO market, with its dominance and scarcity, presents a unique challenge. Those willing to think outside the box, perhaps by converting properties, can still find ways to make their mark. Alternatively, looking beyond the capital might be the key to unlocking the potential of HMO investments.