Free calculator
HMO yield calculator
What yield will an HMO actually make? Enter the purchase price, the refurb cost, the number of lettable rooms and the average room rent, then take off bills, management and voids, and this calculator shows the gross yield on your total money in, the net annual cashflow and the net yield.
The gap between the two yield figures is the point of the exercise. HMOs gross more than single lets because you are letting the same building room by room, but bills, management and empty rooms eat a share of that income a single let never loses. An HMO appraised on gross yield alone flatters itself badly.
HMO yield calculator
A yield figure cannot see Article 4 directions or HMO licensing: check both with the local council before trusting it. The glossary defines the terms, and the HMO analysis guide covers the checks in order.
How the calculation works
Gross annual rent is the number of rooms, multiplied by the average room rent, multiplied by 12. Gross yield divides that by the total money in, purchase plus refurb, not the purchase price alone; an HMO conversion often needs serious capital works, and leaving them out of the denominator overstates the yield. Voids and management are each taken as a percentage of the gross rent, bills are your monthly figure multiplied by 12, and what remains is the net annual cashflow. Net yield divides that by the same total money in.
Worked example: a five-room HMO
Buy at £180,000 and spend £40,000 converting, so £220,000 all in. Five rooms at £550 a month is £33,000 of gross rent a year, a 15.0% gross yield. Now the deductions: bills at £400 a month are £4,800 a year, management at 12% takes £3,960, and voids at 8% cost £2,640. Net annual cashflow: £21,600, a 9.8% net yield.
Still a strong number, but roughly a third of the gross income never reached the owner. That is normal for a well-run HMO, not a sign something is wrong; the appraisals that go wrong are the ones that never modelled the third.
What this yield number cannot see
Article 4 directions and HMO licensing. A yield calculation has no idea whether the council will let you run the property as an HMO at all. An Article 4 direction removes permitted development rights, so converting a family home into a small HMO there needs planning permission that may simply be refused. Licensing sets room sizes, amenity standards and management rules, and can cut your lettable room count after you have bought. Check both with the local council before the yield figure means anything; the glossary defines the terms and the HMO guide covers the checks in order.
- Licensing fees, planning costs and the fire, amenity and room-size works a licence can require
- Higher wear and tenant turnover than a single let; furniture and redecoration are recurring costs, not one-offs
- The spread of rents between rooms; an average hides the small dark room that never lets
- How the property values at refinance, which for smaller HMOs is usually bricks and mortar, not a multiple of the income
Frequently asked questions
What counts as an HMO?
In England and Wales, a property let to three or more tenants forming more than one household who share facilities such as a kitchen or bathroom. Larger HMOs, generally five or more tenants, need a mandatory licence, and many councils run additional or selective licensing on top. Always check the specific council's scheme.
What is an Article 4 direction and why does it matter?
A council direction that removes permitted development rights in a defined area. Where one covers HMOs, changing a family home to a small HMO needs full planning permission, which can be refused. Buying in an Article 4 area on the assumption you can convert is how investors end up owning a single let at an HMO price.
What is a good yield for an HMO?
There is no universal number, and gross figures in sourcing adverts are not comparable with the net figure this calculator produces. The useful tests are whether the net cashflow comfortably clears your cost of finance with room to spare, and how much of the gross survives to net; if more than half disappears in running costs, the deal is fragile.
Why calculate yield on money in rather than purchase price?
Because an HMO conversion can swallow tens of thousands in works before the first tenant moves in. Yield on purchase price alone makes a heavy conversion look better than a turnkey property, which is backwards; the capital is just as spent either way.
Want this run automatically on any Rightmove listing?
PropDetect runs these numbers, and the rest of the deal, on every listing that matches your criteria: refurb costs from the photos, comparable sold valuations, rent, GDV and a strong, solid or avoid verdict across six strategies. You just read the result.
More free calculators
- Stamp duty calculator (SDLT, LBTT and ADS)
Banded SDLT and LBTT with the additional-property surcharge and Scottish ADS done properly, band by band.
- Bridging loan calculator
Total cost of a bridge from monthly rate, term and fees, with the monthly-not-annual quoting explained.
- Flip profit calculator
Profit and margin on GDV for a flip, contingency included, with a down-valuation sensitivity.
- Rental yield calculator
Work out gross and net rental yield from purchase price, rent and running costs.
- GDV calculator
Estimate gross development value from comparable sales, with a price-per-sqft cross-check.
- BRRR calculator
Model buy, refurbish, rent, refinance: cash left in, cashflow and return on the money still in the deal.
- Property ROI calculator
Return on investment for a purchase and refurb, on a sale or a rental exit.
- Refurb cost calculator
Kitchen, bathroom, decorating, flooring and electrics priced by condition level and region, with the 15% contingency built in.