Which is Better For Landlords: Single Let or HMO?

Choosing between renting out a property as a single let or as a House in Multiple Occupation (HMO) depends on various factors, including your investment goals, the demand in your area, and how involved you want to be in property management.

With the cost of living rising, there are 8% fewer single renters on the market, but there are many reasons why you might still choose to go down this route. This article looks at the reasons for and against each option to help you decide.

Single Let

What is a Single Let?

A single let refers to a rental arrangement where a landlord rents out an entire property to one tenant or household under one tenancy agreement. It doesn’t mean to one single person, but simply that there are not multiple tenancy agreements. 

Advantages of Single Lets

●       Easier Management: Managing a single tenant or family is generally simpler, with less day-to-day involvement required compared to an HMO. This simplicity appeals to landlords seeking a more hands-off investment.

●       Stable Tenancies: Single lets often attract longer-term tenants, offering stability and reducing turnover costs.

●       Lower Regulatory Burden: Compared to HMOs, single lets usually face fewer legal and safety regulations, simplifying compliance.

Disadvantages of Single Lets

●       Limited Income Potential: The rental income from a single let is limited to one tenancy agreement, which might yield lower returns than an HMO, especially in high-demand areas.

●       Vacancy Risk: If the tenant moves out, there's no rental income at all, which can be financially straining.

HMOs

What is an HMO?

An HMO is a property rented out by multiple tenants who are not from one household (ie. not a family) but share facilities like the bathroom and kitchen. It's a popular option in urban areas and among students.

Advantages of an HMO

●       Higher Rental Yield: By renting to multiple tenants, landlords can significantly increase their rental income, often exceeding what would be possible with a single let.

●       Diversified Risk: With multiple tenants, the financial risk is spread out. If one tenant leaves, the property still generates income from others, unlike a single let.

●       High Demand: In urban areas and university towns, there's a strong demand for affordable, shared accommodation, making HMOs a lucrative option.

Disadvantages of an HMO

●       Higher Initial and Ongoing Costs: Setting up an HMO can be expensive due to the need for additional facilities and compliance with strict safety regulations. Maintenance costs can also be higher with more frequent wear and tear.

●       Complex Regulations: HMOs are subject to specific licensing requirements, safety standards and potentially planning permissions, requiring more time and effort to ensure compliance.

●       Increased Management Demands: More tenants mean more potential issues and conflicts to manage, requiring a proactive and hands-on approach to property management.

Making the Decision

When deciding between a single let and an HMO, you should consider several factors:

●       Investment Goals: Are you looking for maximum income potential, or do you prefer a more straightforward, less time-intensive investment?

●       Market Demand: The location of your property can significantly influence which option is more viable. Research local rental demand for shared housing versus single-family units.

●       Personal Commitment: Managing an HMO requires more involvement in terms of both time and effort. Consider whether you have the resources and desire to take on this challenge.

Landlord Tips for Success

Regardless of your chosen route, your success requires strategic planning and management. Consul with property experts and legal advisors to help navigate the complexities of property rental.

Make sure you thoroughly vet tenants to ensure you find reliable and respectful renters.

In addition, commit to regular maintenance and upgrades to attract and retain quality tenants and comply with safety regulations.

Ready to Make Your Choice?

A single let provides a simpler, more straightforward investment route, ideal for those seeking stability and minimal management. HMOs, while more complex and demanding, offer the potential for higher yields and diversified risk. Whichever route you take, comprehensive property management can take up a lot of your time. Free yourself up by outsourcing it to our professional service and maintain peace of mind that your property is in good hands. Call 0208 5757630 today.