HMO vs. Single BTL: Which One Is Better?

I get asked this question a lot: HMO vs. Single BTL: Which one is better?


I think it’s time to break it down… because it’s important to know your strategy before you buy.


I’m a massive fan of single BTL’s i.e. one household living in your property.


It’s easier to manage because you only have one set of tenants to deal with. You can choose furnished or unfurnished. There’s no dividing of rooms, adding separate locks (and the key management that comes with it) or more complicated fire safety systems. There are far more mortgage products available and it’s seen as a less risky investment… it’s also more flexible.


But with that, you’ve got lower returns.


On the other hand HMO’s offer higher returns because you are letting a property to multiple tenants. They can be a lot of fun to set up if you are the creative/designer type. And they require you being a people person because you will have multiple tenants = multiple personalities so you’ve got to get your tenant mix right.


HMO’s have a higher set up cost because you are furnishing and will need to split up the rooms to make them self-contained for each tenant.


The other downside with HMO’s is that you either need them to be outside an Article 4 restricted area OR you will need to get planning permission to use it as a HMO, which can be a lengthy process.


As you can see there are pro’s and con’s to each… which doesn’t solve the problem of which one should you buy?


Here’s the plan.


Think to the future first, HMO’s actually sell better as single-family homes because you will attract both investors and home buyers… so you always need the option to put it back into a residential dwelling house.


If you are cash strapped, buy a property that starts life as a single BTL. Use the profit rent to save for the conversation to a HMO, and also get a strategy in place for what you want it to look like. The benefit here is that you get to put your toes in the water of being a landlord, you find out about the property and you have planning and saving time… fabulous.


REMEMBER with single BTLs your main priority should be buying in an area where there is possible for price increase + negotiate at a discount… as this is where you will make most profit (hint: at the end of your fixed term you’ll be able to remortgage and pull the cash out)


If you aren’t cash strapped and the idea of HMO’s appeals, look for properties that already have a HMO license. Unsure of how you know? Your local council will have a HMO register, so you can match the properties on the register with the ones for sale.


This means you don’t have to worry about planning and you can get going straight away with renovating the individual bedrooms and getting your tenants in.


Also remember… no matter which you buy, your property needs to be in a desirable area, have great transport links and the property needs to be well maintained!


So, which one will you be buying next? BTL, that has potential to become a HMO, or are you diving straight into a HMO?

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