Is a house in multiple occupation the highest-yielding strategy for your first deal? This month, we run the numbers on real properties.
I get asked about HMOs more than almost anything else. Usually by someone who's seen a YouTube video where a bloke in a rented Audi claims he's making £3,000 a month from a six-bed in Wolverhampton.
Let me be honest with you. HMOs can be the highest-yielding strategy in property. I've seen rooms in Leeds generating more monthly income than entire flats in London. But they're also the strategy with the most regulation, the most compliance risk, and the most ways to lose money if you don't know what you're doing.
This month I've run the numbers on three real HMO conversions. One works brilliantly. One works but only just. One doesn't work at all — and the reason it doesn't work is something most beginners would never check. That's what this issue is about: not whether HMOs work, but when they work and when they don't.
If you're considering your first HMO, read the deal teardowns carefully. If the numbers don't pass the same tests these properties go through, walk away. There'll be another one next week.
This is a textbook cosmetic flip hiding in plain sight on the auction schedule. The listing says "in need of modernisation" — which in this case means tired décor, an overgrown garden, and a kitchen that hasn't been touched since the early 2000s. Structurally, the surveyor's report from the legal pack shows no issues. Roof replaced 2019. No damp. No subsidence.
Six comparable sold prices within half a mile support an ARV of £220,000–£230,000 for a refurbished 3-bed semi in LS6. The refurb scope is cosmetic: full repaint throughout (£2,800), new kitchen units and worktops (£4,200), bathroom refresh (£2,800), garden clearance and landscaping (£1,800), new carpets and LVT flooring (£3,200), modern lighting and sockets throughout (£1,400), and a front door replacement (£800). No walls moving. No extensions. No planning required.
The risk here is the auction format — you need your bridging finance pre-agreed and your solicitor ready to exchange within 28 days. If you're not set up for that, this isn't your deal. But if you are, the numbers are strong. The 20% Rule passes comfortably: asking price is 28% below estimated ARV.
This is the question that separates a profitable HMO from a £15,000 mistake. The answer depends on one thing: whether your council has an Article 4 direction covering HMOs in that area.
Without Article 4, converting a dwelling to a small HMO (3-6 unrelated tenants sharing) falls under permitted development — you don't need planning permission. You still need an HMO licence, fire safety compliance, and building regulations sign-off, but you don't need to ask the council if you're allowed to do it.
With Article 4, you need full planning permission. And here's what most people don't tell you: many councils with Article 4 directions reject 80-90% of HMO applications. Leeds CV1 has refused all but two in the last eighteen months. That means your entire business plan depends on a planning committee vote — and that is not a foundation for a £150,000 investment.
How to check: go to your council's planning portal, search for "Article 4 direction HMO" and look for the boundary map. If your property is inside the boundary, you need planning permission. This check takes five minutes and could save you the entire project.
Real deals. Real numbers. Every Tuesday. Free.
85 operational tools built from 25 years and 300+ properties. Calculators that run your numbers. AI tools that analyse your deals. Checklists that keep you compliant. Templates that save you thousands. Guides that prevent the expensive mistakes.
+ 73 more tools, templates, calculators, and guides inside the toolkit
I take on a small number of private clients each quarter. If you've got a deal on the table and you want me to look at it with you — your numbers, your property, your situation — this is how that works.
This isn't coaching. It's not cheerleading. It's me sitting down with your actual numbers and telling you what I'd do if they were mine.