Okay, the headline is a little obtuse, but please read on and it should make sense.
HMOs (Houses in Multiple Occupation) are typically converted houses with the same external appearance as a single-family home.
Both HMOs and family houses are homes for people in the same way that cars and motorbikes are forms of transport.
The cost of redesigning and refurbishing the property and, importantly, ensuring it complies with Fire and Building Regulations, means an HMO costs more than a family home; in the same way that cars are different to motorbikes, and cost more.
When buying a car, most people compare the asking price with other similar cars (and not motorbikes). The same principle applies to HMOs.
You can often buy a family house in the same street for less money than an HMO. The problem is, you can’t legally use it as an HMO with its great rental return without spending the extra money to redesign it, etc.
HMOs are a specific type of property that cost more and are bought and sold on a yield basis, i.e., the return/rental income they achieve as a percentage of their investment.
The price and yield should be compared with other similar HMOs that have been refurbished to the same standard. It should not be compared with standard family homes.
Simply put, when it comes to price and yield, you have to compare ‘apples with apples’.
