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Article > The 4 HMO Market Sectors


Article kindly provided by

Paul Preston

In my last article I covered exactly 'what' an HMO is, and 'why' you may want to be doing HMO's - namely due to the MASSIVE cash flow and lifestyle that's possible with theses types of properties.

In this article, I'd like to cover the 4 main HMO market sectors, all of which have their own pros and cons, all of which can be very profitable, but need different considerations and approaches. I have also included a real case study showing how HMO's can generate a clear profit of £1,000 per month.

The 4 HMO Market Sectors

  • Workers
  • Professionals
  • Students
  • Housing Benefits / LHA / UC

My personal HMO's are all workers and professionals. I have never rented to students, but that's only because I don't have a University in my town, and not because I don't think it's a good market. Personally, I've not had the best experience with LHA tenants, but again I know a number of successful HMO landlords and investors that only do LHA. So really, what's the best market then? Well, in my opinion, the best one is the one that's best for you! If you haven't got a University in your town, I'd guess it's not going to be students for example.

My bias is to workers and professionals and I have been able to achieve a very good track record of reliability with tenants who are working. Also, personally, I feel more affinity and rapport with working professionals and this helps be build good relationships with tenants.

Ultimately, you need to decide which part of the market and which types on tenants you want, and really focus on that. There is a real benefit in focussing in just one sector as every enquiry is relevant to your properties and equally and every room / property you have is relevant to the person enquiring. It is of course ok to have different HMO's, eg a few student houses and a few professional houses, but if doing this mixed strategy, the only rule I recommend is this: don’t mix and match in the same house. Eg, LHA does not mix with professionals, students don't mix with workers....quite simply, it's just a different tenant profile and for harmony in the house (which ultimately helps you leverage your time), stick with the same!

Case Study of a £1,000+ HMO

And now I'd like to share a case study of one of my first HMO’s, which generates a clear profit of £1,000 per month.

The property was originally a 3 bedroom townhouse with the following original layout: ground floor – integral garage, wc, kitchen/diner; first floor – lounge and bedroom 1; second floor: 2 bedrooms and family bathroom. The garage had since been converted into a family room / study / 4th bedroom. In this property, the kitchen / diner is a large space, so it’s more than enough ‘communal’ space for me to use all other rooms as bedrooms (including what was traditionally the lounge). So, I now have 5 bedrooms to let and still have a good kitchen / communal area, plus 2 bathrooms, as the ground floor wc was big enough to easily add in a shower.

This property was bought for c £125,000, and would rent as a single let for c £750 pm. However, on an HMO basis, the rooms average out at £375 per month (ranging from £300 - £450), which gives £1,875pm. The mortgage + bills comes to around £800pm, giving a positive cash flow in excess of £1,000 per month.

This property is in a high rental demand area, so operates at ‘pretty much’ 100% year round occupancy. It’s walking distance to the town centre, with great transport links, local amenities / shops / take-aways etc, and all the rooms are good sizes.

This was one of my first HMO’s and really got me started on making this my main strategy in property. Today, some of my HMO’s return double this cash flow, but once I knew £1,000 clear profit per property, per month was achievable, I’ve never looked back. Undoubtedly purchase prices will of course vary from area to area – as will room rates – and I was fortunate in that the garage had already been converted (saving me some re-furb costs), but the point is this, a clear profit after all costs of £1,000 per property, per month IS achievable, and I’ve gone on to repeat the model again and again.

When you start with then end in mind and think about the income you want, take that monthly figure and divide it by £1,000….and that’s how many HMO’s you need to have the lifestyle you want, and I’ll be talking more about the lifestyle that’s possible as an HMO Investor / Landlord in my next article.

In the mean time, if you'd like to receive my latest FRE training videos as soon as they're ready, simply visit my website and register your details:


Paul has written other articles about HMOs, check them out here -

HMO's What & Why

HMO planning and Article 4

The Lifestyle that's Possible with HMO's

About Paul Preston, The HMO Guy.

As well as being a successful property investor and businessman, Paul is a normal, down to earth, regular guy who's simply learned about property, taken action and worked hard to become financially free. Paul has been investing in property for nearly 15 years, is a self-made millionaire twice over (which means he made it, lost it all, and made it back again), he’s an international speaker, author and serial entrepreneur, having had several successful businesses outside of property.

Paul is an expert on the subject creating exceptional wealth through property and his specialises in HMO’s and Multi-let properties for high cash flow, generating returns well in excess of £1,000 clear profit, per property, per month.



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