How much profit does an HMO make per month?

Monthly profit on an HMO varies enormously depending on the number of rooms, rent per room, mortgage costs, and bills paid by the landlord. A typical 5-bed HMO in a northern university city — purchased for £250,000 at 75% LTV — might generate gross rent of £3,000/month (5 rooms × £600), with costs of approximately £2,200/month (mortgage, bills, agent, maintenance, voids), leaving a net monthly profit of approximately £800 before tax. Higher-yielding HMOs in cheaper markets can significantly exceed this.

Do HMOs need a licence in the UK?

Mandatory HMO licensing applies to any property in England occupied by 5 or more people from 2 or more separate households. Many local councils also operate additional or selective licensing schemes covering smaller HMOs. Licensing costs vary by council but typically range from £500 to £1,500 per five-year licence period. Failure to licence a licensable HMO is a criminal offence and can result in an unlimited fine. Always check with your local council before purchasing a property for HMO use.

What are the main costs of running an HMO?

HMO running costs are significantly higher than single-let properties. The main costs are: mortgage interest (the largest), utility bills paid by the landlord (gas, electricity, water, broadband — typically £400–£700/month for a 5-bed), letting agent HMO management fees (typically 12–15% of rent), maintenance and repairs (typically 2% of property value per year given higher wear), HMO licensing (amortised over the licence period), insurance (HMO-specific policies cost more than standard landlord insurance), and void provisions (higher than single-let due to room-by-room turnover).

HMO Calculator UK 2025 | Profitability, Yield & Cash Flow

Q: What is a good yield for an HMO in the UK?

A good gross yield for a UK HMO is typically 10–14%, significantly higher than standard single-let buy-to-let properties. However, HMOs have substantially higher running costs — landlord-paid bills, higher maintenance, HMO licensing, and greater management intensity. A well-run HMO with a 12% gross yield might net 6–8% after all costs, compared to a single-let at 7% gross netting 4–5%. Net yield and monthly cash flow are more meaningful metrics for HMO investment than gross yield alone.

HMO Profitability Calculator

Enter your property details below to see the full financial picture.

Property

Purchase price

Number of lettable rooms

Rent per room / month

Occupancy rate

Typically 85–95% for well-located HMOs

Mortgage

Loan-to-value (LTV)

Mortgage interest rate

HMO BTL mortgages typically 4.5–6.5%

Running costs

Landlord-paid bills / month

Gas, electricity, water, broadband

Management fee

HMO management typically 12–15%. Enter 0 if self-managed.

Annual maintenance

Budget 1.5–2% of property value/year

HMO licence cost / year

£500–£1,500 per 5yr licence, amortised

Insurance / year

HMO policies typically £700–£1,400/year

Other costs / year

Accountancy, inspections, compliance

Monthly cash flow

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per month

—

Gross yield

—

Net yield

—

Annual profit

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Gross annual rent

—

Total annual costs

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Cash-on-cash return

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How the HMO calculator works

A house in multiple occupation (HMO) is let room by room to individual tenants — typically students or young professionals — each with their own tenancy agreement but sharing common areas like kitchens and bathrooms. The financial model differs substantially from a standard single-let buy-to-let: gross rents are higher, but so are running costs, particularly landlord-paid utility bills, licensing, and management fees.

This calculator models four levels of return, each giving you a more complete picture:

Gross yield — total annual rent at full occupancy divided by purchase price. The headline figure, but misleading without costs.
Net yield — annual rent (adjusted for occupancy) minus all running costs except mortgage, divided by purchase price. The income return after operating expenses.
Monthly cash flow — actual cash in vs cash out each month after all costs including the mortgage. The number that determines whether the property pays for itself.
Cash-on-cash return — annual net profit divided by total cash invested (deposit + purchase costs). This measures the return on your actual invested capital, not the total property value.

Gross yield

(Rooms × Rent × 12) ÷ Purchase price × 100

Net yield

(Effective annual rent − All running costs excl. mortgage) ÷ Purchase price × 100

Monthly cash flow

Effective monthly rent − Monthly mortgage interest − Monthly running costs

Cash-on-cash return

Annual net profit ÷ Cash invested (deposit + fees) × 100

Worked example — 5-bed HMO in Sheffield

Sheffield S10 · 5-bed HMO · Purchased £280,000 · 75% LTV

Gross annual rent (5 × £575 × 12)	£34,500
Effective rent at 90% occupancy	£31,050
Mortgage interest (£210k at 5.2% IO)	−£10,920
Bills (gas, elec, water, broadband)	−£5,760
Management (12% of effective rent)	−£3,726
Maintenance (1.75% of value)	−£4,900
HMO licence (amortised)	−£250
Insurance	−£900
Other (accountancy, compliance)	−£500
Total annual costs	£26,956
Annual net cash flow (pre-tax)	£4,094 (£341/month)
Gross yield	12.32%
Net yield (before mortgage)	7.42%

This Sheffield HMO generates £341/month positive cash flow before tax. The gross yield of 12.32% compresses to a cash yield of approximately 1.46% after mortgage interest — but the cash-on-cash return on the £70,000 deposit invested is approximately 5.8%, comparable to a high-interest savings account but with the additional benefit of capital appreciation and mortgage paydown if on a repayment basis.

For a higher-rate taxpayer under Section 24, the taxable profit calculation is more complex — the mortgage interest is not fully deductible and only a 20% tax credit applies. Our BTL tax guide explains this in full.

HMO vs standard buy-to-let — when does an HMO make sense?

An HMO generates significantly higher gross rent than a single-let on the same property — but the additional complexity, running costs, and compliance requirements need to justify that uplift. The key questions are:

Is your location genuinely suited to HMO demand? University towns, hospital catchment areas, and city centres with large young professional populations have consistent room-by-room demand. Suburban locations without these demand anchors may struggle to sustain full occupancy year-round.
Can you manage the compliance burden? HMOs require mandatory licensing (for 5+ person properties), specific fire safety requirements (interlinked smoke alarms, fire doors, fire extinguishers), minimum room sizes, and in many councils additional selective licensing. These are non-negotiable legal requirements — not optional extras.
Is the cash flow sufficient to justify the premium mortgage rate? HMO BTL mortgages typically cost 0.5–1.5% more than standard BTL mortgages. The rental premium from room-by-room letting must cover this additional financing cost and still produce a better net return than the property would as a single let.

For the right property in the right location, an HMO can produce cash-on-cash returns of 6–12% — significantly above standard single-let properties at current BTL mortgage rates. Use the calculator above to assess any specific deal, and compare it against our rental yield calculator for the single-let alternative on the same property.

Frequently asked questions

What is a good yield for an HMO in the UK?

A good gross yield for a UK HMO is typically 10–14%, significantly higher than single-let properties. However, HMOs have substantially higher running costs. A well-run HMO at 12% gross might net 6–8% after all costs. Net yield and monthly cash flow are more meaningful than gross yield alone. Use this calculator to see the full picture rather than focusing on the headline gross figure.

How much deposit do I need for an HMO mortgage?

Most HMO BTL mortgages require a minimum deposit of 25% (75% LTV). Some specialist lenders offer products at 80% LTV for smaller HMOs with strong yield. The deposit requirement is higher than standard residential mortgages because HMO properties are considered a higher-risk lending category. On a £280,000 HMO property, a 25% deposit means £70,000 in cash plus purchase costs.

Do I need a licence for an HMO?

Mandatory HMO licensing applies in England to any property occupied by 5 or more people from 2 or more separate households. Many councils also operate additional licensing schemes covering smaller HMOs (3–4 persons). Licensing costs range from £500–£1,500 per five-year licence period. Operating an unlicensed HMO is a criminal offence. Always check with your local council — licensing requirements vary significantly between authorities.

What bills does an HMO landlord typically pay?

Most HMO landlords pay utility bills as part of the room-rent package: gas, electricity, water, council tax, and broadband. This is almost always included in the room rent (unlike single-let properties where tenants pay their own bills). Budget approximately £80–£140 per room per month for bills in 2025, though this varies significantly with energy prices and usage. Always model landlord-paid bills explicitly — omitting them is the most common cause of HMO cash flow calculations being overstated.

Is an HMO still worth it in 2025?

Yes, but only with the right numbers and location. HMOs continue to generate positive monthly cash flow in university cities and hospital-adjacent areas where single-let properties at current BTL mortgage rates do not. The key change since 2017 is Section 24 — the tax on notional profit including mortgage interest makes HMOs more attractive than single-lets for higher-rate taxpayers precisely because the higher gross yield provides more room to absorb the tax impact. For cash buyers or limited company investors, well-located HMOs remain among the most cash-generative UK property strategies available.

Related calculators and guides

Disclaimer This calculator provides estimates for illustrative purposes only and does not constitute financial, tax, or investment advice. HMO investment involves significant risk including void periods, maintenance costs, regulatory changes, and property value fluctuations. Always conduct independent due diligence and consult a qualified financial adviser, accountant, and solicitor before making any property investment decision.

About the author

Kelvin Peltier

Retail leader, entrepreneur and founder of Poqet.io.

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✓ Editorially reviewed — all Poqet guides are checked for factual accuracy before publication and updated when UK rates or legislation change. Editorial Policy