Net Yield
0.68%
Gross Yield: 8.49% · Gross monthly rent: £2,475
Annual Costs
HMO vs Single-Let Comparison
Illustrative only. Licensing requirements (mandatory HMO licence for 5+ occupants from 2+ households, plus additional/selective licensing schemes many councils run for smaller HMOs) and fees vary by local authority — check with your council before assuming a figure. Mortgage cost assumes interest-only. Not financial advice.
What This Calculator Does
This tool works out real gross and net yield for a House in Multiple Occupation (HMO) — a single property let room-by-room to unrelated tenants — accounting for the costs unique to this strategy: HMO licensing fees, bills paid on the tenants' behalf, and management fees that typically run higher than a standard single-let.
Enter the number of lettable rooms, rent per room, and expected occupancy to get gross rent, then add licensing, bills, management, maintenance, insurance, and mortgage costs for net yield and cash-on-cash return. The comparison section at the bottom shows the yield premium versus renting the same property to one household.
How the Calculation Works
Gross monthly rent = number of rooms × rent per room × occupancy rate. Occupancy accounts for void periods between tenants — a 5-bed HMO at 90% occupancy is effectively letting 4.5 rooms on average across the year.
Net yield subtracts all annual costs from gross annual rent: bills (if bills-inclusive), the HMO licence fee, management fee (% of gross rent — HMOs commonly run 10–15%, above the 8–12% typical for a single-let, since more tenants means more day-to-day management), maintenance, insurance, and mortgage interest.
The HMO yield premium compares gross yield against an equivalent single-let rent for the same property — the number that justifies taking on the extra licensing, management, and turnover complexity of multiple tenancies instead of one.
Worked Example
A 5-bedroom HMO bought for £350,000, let at £550 per room with 90% occupancy, bills-inclusive at £400/month.
- Gross monthly rent: 5 × £550 × 90% = £2,475 (£29,700/year)
- Bills (inclusive): £400 × 12 = £4,800
- HMO licence: £1,000
- Management (12%): £3,564
- Maintenance + insurance: £2,200
- Mortgage (75% LTV, 6.0% IO): £262,500 × 6.0% = £15,750
- Total annual costs: £27,314
Gross yield comes to 8.49%, but net yield after all HMO-specific costs is just 0.68% — compared to a 5.14% gross yield if the same property were let to a single household at £1,500/month, a yield premium of +3.35 percentage points for running it as an HMO, before weighing the extra management burden.
Frequently Asked Questions
Do I need a licence to run an HMO?
In England, a mandatory HMO licence is required for any property let to 5 or more tenants forming 2 or more households sharing facilities, regardless of size. Many councils also run additional or selective licensing schemes covering smaller HMOs (as few as 3 tenants) in their area — always check with the local authority, since operating an unlicensed HMO that requires one carries significant penalties.
Why is HMO net yield often so much lower than gross yield?
HMOs carry more cost lines than a single-let: licensing fees, bills often paid by the landlord, higher management fees (more tenants means more turnover, more move-in/move-out admin, more day-to-day queries), and typically higher insurance. These stack up quickly and can turn a strong-looking gross yield into a thin net yield, which is exactly why this calculator separates the two.
Is bills-inclusive letting always the right approach for an HMO?
Not always, but it's the norm for room-only HMO lets, since splitting utility bills fairly between unrelated tenants sharing a meter is impractical. Some landlords pass bills through as a fixed monthly charge instead of building it into the headline rent — either way, budget for it as a real cost, not revenue.
Can I get a standard buy-to-let mortgage for an HMO?
No — most mainstream buy-to-let lenders exclude HMOs entirely. You'll typically need a specialist HMO or semi-commercial mortgage product, which usually caps LTV lower (75–80% is common, sometimes less for larger HMOs) and prices at a premium over standard BTL rates, which is why this calculator's mortgage rate range extends higher than the single-let Rental Yield Calculator.
Is the higher yield worth the extra management involved?
It depends on your capacity to manage — or pay someone to manage — a higher-turnover property with more moving parts than a single tenancy. The yield premium shown here is the reward for that complexity; if you're not prepared to handle (or budget properly for) more frequent turnover, licensing renewals, and tenant management, a single-let at the lower yield can still be the better risk-adjusted choice.