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The Ultimate 27 HMO Investment Property Hotspots in 2023

HMO Property Investment Areas

⏱️ 20 minute read

📅  Written on 11th June 2023

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Part 1:


How to create a property business plan

Part 2:


2022 Property Investment Strategies

Part 3:


Calculate Yield & ROI on Investment Property

Part 4:


Buying Property Through a Limited Company

Part 5:


Best HMO Investment Areas in the UK

Part 6:


How to flip a house as a property investor


Chapter 1

This is the ultimate guide for the best area for HMO property investment in 2023. 🔥


And let me be clear about something:


This is NOT 🙅‍♂️ your average “ best buy-to-let area” predictions post.


Yes, I’ll cover the data and show easy to understand breakdowns 📈 of the best areas for HMO property investment this year.


But you’re also going to see unique data that shows low property competition and high tenant demand.


So if you’re looking to find your next HMO property investment area, you’ll love 🏄 this new guide.

HMO Property Areas

I analysed over 324 data points for HMO property.

This includes Government sources, Rightmove, Zoopla, Office of National Statistics & more.

The data pull was during the global pandemic. House prices may be skewed to reflect the market.

The data pull was in July so also factor in timing & seasonal impacts. 

Lastly – I haven’t added article 4 over the areas analysed below so keep that in mind. 

In this brand new report you’ll learn:

Lets dive right into the findings.

Chapter 2

HMO Property Investments: Highlights and Key Findings

➕ Excluding London, rents are highest in Cambridge at £620 a month for a room. The cheapest rooms in Hull at £300 pcm and Aberdeen at £266 pcm


➕ The most affordable cities for Terraced houses are Sheffield (£153k), Nottingham (143k), Liverpool (122k) and Hull (109k)


➕ The more expensive cities outside of London to buy a terraced house are Oxford (£477k), Cambridge (£397k) and Bath (401k)


➕ Portsmouth had incredible capital growth over the past 5 years at +16%. Others include Manchester (+10%), Leeds (8.1%), Warrington 4.29% with Aberdeen seeing a -8.56% decline over 5 years. 


➕ Glasgow, Liverpool & Leeds rank top for Terraced house prices vs room rent in terms of value for money.


➕ London is, of course, the worst for getting the most rental income VS house prices, offering the lowest ROI.


➕ Manchester (1806), Coventry (1213), Birmingham (1608) and Bristol (1212) have the highest supply of rooms available on the market. 


➕ Hull (236), Warrington (265), Bath (328), & Plymouth (334) having the least amount of room stock available on the market meaning less competition


➕ The highest tenant demand for rooms can be found in Manchester (1345), Bristol (1126), Glasgow (686), Edinburgh (668) and Birmingham (632).


➕ Warrington and Glasgow are the best places for room stock VS tenant demand. There’s 1.4 people for every room available in Warrington and 1.3 people for every room available in Glasgow.


➕ Competition is tough in Coventry, Hull, Birmingham and Leicester. All have up to 2.4 rooms available for every potential tenant / 0.4 people looking for every room.

➕ Manchester (73k), Nottingham (67k) and Birmingham (66k) have the highest amount of students in their cities.

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Chapter 3

Where are the highest and lowest room rents in HMO Investment Properties in the UK?

Outside of London, HMO property rental rates for rooms are best in Cambridge, Glasgow, Bournemouth & Reading.

HMO room rents in the UK

As expected, rents are the strongest per room in London. 💪


Outside of the capital northern, cities like Leeds are championing the way.  🏆


The average room rent in Leeds is £548 per month for a room. 


Surprisingly, Manchester is demanding £468 a month. 😱 I was a bit surprised it’s less than Leeds!


I expected this to be the highest in the north but seems not, especially considering house prices.


Liverpool is demanding higher rents than other northern cities such as Sheffield & Warrington by £10 per month. 


Not too surprisingly, Newcastle, Hull and Aberdeen have the lowest room rental rates for an HMO investment property. 


Typically the north-east ↗️ and above have lower house prices, income and rental rates.


Southern towns ⬇️ and cities typically dominate the higher rents.


There are some southern locations ranked quite low down the list which may be a surprise when compared to house prices.


To conclude room rates, excluding the very top and very bottom, there isn’t much difference in rents which vary from £400 to £550. 


This could make up to £1k cashflow difference per year but when factoring in property prices.


This shows why northern cities give better returns as housing stock is typically cheaper. 👍

Chapter 4

Where is the cheapest place to buy a house? And the most expensive?

The cheapest place to buy a house is Hull. The most expensive outside of London, is Oxford.

If you’re looking to protect your initial money as much as possible and then buying a property in Oxford could wipe out your entire deposit. 🙅‍♂️


Especially when you factor in the rents you’ll get for a room.


More affordable cities in the UK include Sheffield Liverpool, Nottingham and Hull.


These cities demand a 25% deposit of around £38,000 for example in Sheffield. 💷


Remember these are average prices, meaning that some properties are higher. Some are lower.


This means finding properties below market value will enable you to add value through a refurb, or buying under the going rate. ⚒️


It’s possible to buy properties in Liverpool, Hull & other northern cities for under £100k if you’re after a 3-bed terraced property, for example.

average detatched house price
average semi detatched house price
average terraced house price
average flat price

Chapter 5

Where are the highest property price increases over the past 5 years?

If you bought a property in Portsmouth 5 years ago, you are 16% better off in terms of capital growth. If you bought in Aberdeen, you’re 8.5% worse off.

property price increase over past 5 years

Although purchase prices and room rental rates are very important. ☝️


It’s key to consider capital growth to ensure your property is increasing in value. 📈


In terms of the property cycle, the market over the past 5 to 10 years has been recovering since the 2008 recession. 


We’re due a mid-cycle wobble 🤪 before an expected rise again at which point property prices crash again. 


The 18 year cycle has repeated itself many times in history and although is not exact science, it’s a good rough indicator 🧐 of what’s happening.


The Coronavirus Pandemic may change things, it’s a bit too early to tell at the time of posting this. 


Cardiff, Glasgow & Leicester have had great growth all over 10%+ over the past few years. Also holding very strong is Manchester at 10.76% and Nottingham at 10.5%


Some investors say that increases and decreases ripple outwards from London. 🏙️


London has seen fantastic capital growth over the years, but has remained pretty flat since Brexit & Coronavirus. 


The question is 🤔 – will northern cities and others outside of London continue to see capital growth and healthy gains.


It’s key to remember some places like Liverpool have barely recovered since their 2008 levels.


We’re only now just starting to see positive uplifts.

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Chapter 6

Where is the best place to buy an HMO property?

Glasgow, Liverpool and Leeds would give you the best bang for your buck comparing house prices VS room rents when looking at HMO property.

Now, this is where it gets really interesting! 🥳


I’ve looked at property prices for terraced and semi-detached houses.


Then compared them against average room rental rates to create an indicator. The higher the better. 


This is a custom figure 📊, taken by looking at the room rent for the area.


Dividing it by the average property price.


Then multiplying by 1000 to make the number a bit more friendly to look at. 


Rather than looking separately at property prices and looking at the cheapest area to get more for your money.


Or looking at the best rents but being priced out of an area.


This graph puts those two together to work out the strongest cities combining these two data points. 


Towns & Cities in the north are dominating the top rankings here typically where house prices are lower.


But, rents remain higher.


Glasgow, Leeds and Liverpool all performing well along with Manchester, Nottingham and Sheffield. 


Quite expectedly a lot of southern locations which have high property prices don’t vary too much in rent (+/- £100).


This has a big impact on whether a deal would work. For example Liverpool is a 3.6x better area than what you’d find in London for the money on a terraced house.

best HMO areas
best hmo areas uk

Supply VS Demand

Supply and Demand is your best friend when it comes out to evaluating a property investment area. Some areas are supersaturated with HMOs. Others are now. 

Check them out below

rent to rent
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Chapter 7

Where is the highest demand for HMO rooms?

There’s an extremely high demand for HMO rooms in Manchester, Bristol, Edinburgh and Birmingham but in some places, there’s too much supply for that demand.


This data is probably the most eye-opening. 👀


It takes Spareroom data and the number of rooms available.


Then takes the number of people 🙋‍♀️ who have posted ads looking for rooms. 


And puts the two together as a metric. 🧮


It’s not fool-proof but is a good way to gauge 🎚️ the number of people looking for rooms. 


London is removed from this graph as it towers above every other town & city.


There are almost 4 people looking for every room available in London which means it’s a landlord’s market.


This is unsurprising, there are thousands of people (over 8000) looking for rooms.


They are likely are a mixture of students and young professionals hungry to progress in their career.

HMO supply and demand

Warrington and Glasgow are the only places where more people are looking than what rooms are available. 🔎


This means that if you have a room in these areas – expect a lot of responses to come your way from potential tenants!


Coventry, Hull & Reading are the most competitive ⚠️ for HMO landlords where there are 2.4 rooms for every person.


If you flip it, it would be 0.4 people for every room.


You’ll really need to stand out here to get tenants attention on listings.


The key here is understanding how you can stand out in a VERY crowded market.


Is every room a magnolia box? Do they all have grey feature walls with splashes of yellow? Do something different. 


To make it easier to understand – I combined the two data sets together.


This helps understand how many people there are for every room in each city.

Here's what I found

HMO supply and demand 2020

Again – I removed London from this as it skews all the data. 


Warrington and Glasgow are easy to fill rooms. ✅


This is because there are more people looking than rooms available on the market.


Anything close to 1 on this graph means there’s 1 person looking for every room on the market. 


A lot of cities are sitting between 0.7 to 0.9 people per room. ✅


This means there’s more stock than people.


But a lot of that stock on the market is likely to be bad quality. 🤯


Therefore it is easy to beat a lot of the competition.


Don’t be that landlord who provides their tenants with awful accommodation.


I imagine the reason you’re here is that you’re an investor who wants to do well and provide great properties. 🏡


If you simply design beautiful homes for people.


Stand out and ensure you get proper wide-angle photography shots of your houses and rooms. 📸


You will stand out a mile on Spareroom. 


Interestingly, Hull & Birmingham are very low.


There’s A LOT of stock on the market, but not many people looking for those rooms.


This means it’s very competitive and is going to be harder.


It doesn’t mean it’s impossible to fill a room if you have a good product – but it won’t be as easy as other cities.  🇬🇧


This also may mean that rents are pushed down and that tenants have the bargaining power to ask for lower rents than what you’re advertising.

Goal Setting Guide

Free Goal Setting Guide

Are you struggling to find focus in your property business? Do you have a clear, tangible and measurable plan of action? Download this free handy goal setting guide that explores wherey you are today, your financial literal and north star lateral goals – and what you need to do to bridge that gap to meet your goals. 

Chapter 8

Where is the highest demand for HMO rooms?

If students are your focus, London is best in terms of student enrolment, outside of London, Manchester, Nottingham, Birmingham, Leeds & more are still very good.


The top 16 towns and cities listed below have over 25,000 students. 👨‍🎓


With particular high student populations in Manchester, Birmingham, Nottingham, Leeds, Sheffield and Bristol. 


Students are council tax-exempt which can help reduce the running costs of an HMO. 💷


Dealing with student HMO’s also means that you have a period over the summer.


You can fix-up properties, repair damages and reset for another year. 🔨


Students afford their rent through a student loan or grant.


Some may have parental support. 👨‍👩‍👦


As student incomes are quite low they often have a guarantor which is a parent or guardian.


This means if they fail to pay, the guarantor will take over rental payments.


Chapter 9

In Conclusion

If you found this useful, please share with others.


In this brand new report we have covered:


➕ Average house prices in popular UK towns & cities

➕ How much rooms rent for in each city

➕ House price increases over the past 5 years

➕ Best areas for house prices VS room rental income

➕ The best & worst areas for room supply & tenant demand

➕ Where the biggest student populations are


Please remember that you should do your research in each area.


There can be both great and not so great parts to every city!


You could look at demographic data on the census.


Employability rates.


Is it close to a hospital or transport links?


Ages in areas.


This will help you ultimately find the best area in your chosen city.


Now… the next thing is to choose an area considering the distance from where you live, how you’ll manage the property and get out there and start viewing potential properties.

Check out more exciting property content.

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