HMO conversions hit investors for £82,000 on average
The average cost of converting a property into a house in multiple occupation (HMO) is estimated at more than £82,000 across England, according to new research by residential property management specialist, Rushbrook, although investors looking to avoid the conversion process have more than 2,500 existing licensed HMOs available to purchase.
Rushbrook analysed HMO property listings across England using PropertyData, alongside estimated conversion costs based on regional construction costs and the average number of bedrooms within existing HMO properties.
HMO conversion costs average £82,084
The research estimates that converting a property into an HMO* costs an average of £15,275 per bedroom across England. Based on an average HMO size of 5.37 bedrooms, this equates to a total estimated conversion cost of £82,084.
London is the most expensive region, with an estimated conversion cost of £92,796, based on £18,007 per bedroom and an average of 5.15 bedrooms.
The South East follows at £90,552, while the South West ranks third at £89,737.
At the other end of the market, the North East offers the lowest estimated conversion cost at £70,955, followed by the North West (£73,076) and East Midlands (£74,485).
Total HMO investment could exceed £530,000
However, the conversion itself represents only part of the initial investment required for landlords looking to enter the HMO market.
When factoring in the estimated purchase price of an eligible three or four-bedroom property, Rushbrook’s analysis puts the average total cost of purchasing and converting a property into an HMO at £531,882 across England.
This comprises an estimated property purchase price of £449,798 and an additional £82,084 in conversion costs.
London has the highest estimated total investment requirement at £957,105, followed by the South East at £630,333 and the East of England at £557,416.
Over 2,500 existing licensed HMOs available to investors
For landlords who would prefer to purchase an existing HMO rather than undertake a conversion themselves, Rushbrook’s analysis identified 2,507 licensed HMO property listings across England, with an estimated average asking price of £340,264.
The South East accounts for the largest proportion of available listings, with 478 properties representing 19.1% of the national total.
The East Midlands follows with 416 listings (16.6%), while the North West accounts for 309 (12.3%) and the South West 304 (12.1%).
Yorkshire and the Humber offers the lowest estimated average asking price for an existing licensed HMO at £203,146, followed by the North West (£211,817) and North East (£220,297).
In contrast, London has the highest estimated average asking price at £763,981, followed by the South East (£437,083) and East of England (£413,361).
Managing Director of Rushbrook, Roma Sharma, commented:
“Converting a property into an HMO is a substantial financial undertaking, and the conversion costs alone can represent a significant investment before landlords have even factored in the cost of purchasing the property.
For those who would rather avoid undertaking a conversion, there is an established market of licensed HMOs available to purchase. However, buying an existing property doesn’t necessarily mean it will require no further work or investment, and landlords still need to carry out the appropriate due diligence.
Whichever route investors choose, the initial purchase or conversion is only the beginning. HMOs bring additional management responsibilities, particularly around maintenance, tenant relationships and compliance, and ensuring these are handled professionally is essential to protecting the investment over the longer term.”ity or investment returns of either approach.
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