Best places to buy an HMO in the UK.
In this article, we look at the best places to buy an HMO in the UK.
This list has considered many factors including location, yield, regeneration, demand and other factors which have helped us to come up with our top 10 places to buy an HMO in the UK.
Criteria for a good location to invest in an HMO
If you are looking for a good HMO property, the yield can help you decide if the rental income is worth the outlay to purchase the property.
We have seen an increase in rental yields over the last 12 months, outpacing property values.
When assessing a place to invest in an HMO there are several key components any investor must consider.
- Distance from your home address. – How accessible is the property from your home address, consider how often you may need to visit the property. If you are a hands-on landlord managing lettings and maintenance yourself then this will bear more weight than a hands-off landlord using a full-service lettings agent.
Purchasing property in an area you can access regularly can help you build up your network with sales and lettings agents. A good network of property professionals can help you find off market opportunities.
- Your local knowledge of the area. – How well do you know the local market dynamics in that area? Local dynamics can include changes to planning restrictions as well as new infrastructure that may affect letting demand such as new hospitals, university expansion or head offices for a major employer, all of which can change the letting dynamics of an area.
Local knowledge of an area could be because of having children who have studied & lived in the area, perhaps you grew up in or have family in the area. Local knowledge can help identify good and bad areas of a City/Town and keep informed of new developments that affect property prices and tenant demand.
- Tenant demand. – Tenant demand is crucial as you wish to avoid void periods. Know who you will rent to and what demand there is in the area. Are there any imminent changes to the make up of an area which could bring in fresh demand for letting for your HMO. Being aware of a local councils housing plans is a useful way to identify upcoming areas. Also consider regeneration plans for the area and changes to article 4 areas.
- Article 4 planning. Article 4 requires a property to go through planning to change from residential Class 3 to HMO use class C4 and is designed to control where and how many properties are let as an HMO. Buying a property and converting a property into an HMO before article 4 regs come into force can be a shrewd move.
Top 10 places to buy an HMO in the UK.
Considering all the above factors and taking data from our landlords as well as data from the market, these are our top 10 places to invest in an HMO property in the UK.
- Edinburgh
Edinburgh, Scotland’s capital, is the UK’s most economically productive city outside London. Unemployment has halved in the last decade and average pay is higher than the other 8 big Cities outside of London.
Edinburgh has six universities with over 55,000 students. Full time students make up over 12% of Edinburgh’s population.
Best areas for HMO in Edinburgh are Bruntsfield, Marchmont, Morningside & Newington
The average house price in Edinburghis £334,000.
All house price data in this article is taken from rightmove.
- Cardiff
Cardiff has good transport links, three universities and has undergone a lot of regeneration in recent years. Cardiff is a favourite among many of our landlords with properties in the Cathays area of Cardiff. There is a good blend of property value and yield in Cardiff.
Best areas for HMO in Cardiff are Cathays & Plasnewydd.
The average property price according to Rightmove is £291,000.
- Durham
Durham is a beautiful City surrounded by the river Weare. It is home to Durham university and the HMO properties here are often let to students.
Best areas for HMO in Durham County are in Durham City in close approximation to the university. HMO yields achieve around 9% gross here.
The average house price in Durham is £194,036 making it a reasonably priced City for most landlords.
- Cambridge
Cambridge is of course home to one the best universities in the world. The Cambridge university ranks 5th in the world in the QS rankings. The student population is over 24,000. Cambridge property prices are consistently strong.
According to the ONS house prices increased 3.5% year on year making this a strong area for capital appreciation. Rents were up to for the same period increasing by 7.6%.
The average house price in Cambridge is £605,261.
- Bristol
Bristol is a fantastic place to live, don’t just take our word for it, this article in the Independent ranked Bristol as one of the top places for young people to live outside of London. The city has two world-class universities. Bristol is home to some major employers such as Ovo Group, Airbus and Hargreaves Lansdown.
Some of the best areas for HMO in Bristol include Southville, Southmead, Bedminster, Filton & Clifton.
Bristol ranks number 1 in Aldermore’s buy to let city tracker for 2024.
The average house price in Bristol is £384,414.
- Manchester
Manchester is the largest metropolitan area outside of London and provides a healthy economy expected to grow by 2.5% from 2024 – 2026 (3rd place behind London and Birmingham).
Manchester has a robust job market, and a large student population. There are over 100,000 students living in Greater Manchester including 27,000 foreign students.
With a strong economy and high student numbers demand for HMO is good. Manchester ranks second in Aldermore’s buy-to-let city tracker.
The average property price in Manchester is £300,282.
- Birmingham
Birmingham has the largest economic output outside of London, mostly dominated by the service sector. The city is also home to 8 universities and has a student population of approx. 80,000. The city is in the process of major regeneration with billions being spent on the city centre, railways and the airport.
A report from JLL expects property prices to increase 27% by 2026 making Birmingham one of the top places in the UK to invest in property.
The average house price in Birmingham is £272,937.
- Portsmouth
Portsmouth is a university town and with over 25,000 students the area has strong tenant demand. According to the ONS private rental prices increased 12% year on year in Portsmouth.
The best HMO areas are central areas such as Southsea and Fratton.
Portsmouth makes it into Aldermore’s top 10 buy-to-let city tracker at number 7.
The average house price is £283,803 in Portsmouth.
- Coventry
Coventry University brings in over 30,000 students and that demand gives it the number 3 spot in Aldermore’s buy-to-let city tracker.
The most popular areas for HMO are in the Northeast of the city between Coventry college and Coventry University.
According to the ONS house prices are up 2.4% year on year and rents are up 10% over the same period.
The average house price in Coventry is £241,809.
- Sunderland
A University City with some 25,000 plus students. Sunderland makes our list as it ranks top for yield in a 2024 Zoopla report with a yield of for an average BTL (standard AST let) of 8.96% (average rent £626pm and property price £83,842). The average property price is at the lower end of the scale for the UK and therefore may be attractive to those on a smaller budget.
So, there we have it, our top 10 places to buy an HMO property in the UK. Hopefully this article has given you some insights and is helpful in making your HMO investment decisions.
Fox Davidson.
Fox Davidson are a specialist HMO Mortgage Broker. We have been advising clients on HMO funding options for property across the UK for over 10 years. To discuss HMO mortgages please call or complete our short enquiry form.
