The cost-of-living crisis continues to bite. UK inflation has hit a 40-year high. Amid rising refurb costs and continued capital growth, property investors may well be asking themselves: Is HMO investment still a viable proposition?

To help us answer this question, we interviewed Jon Rose who has been a Franchise Partner of Platinum Property Partners since 2011 and holds a portfolio of 18 HMOs with his business partner Lindsay.

Jon is also the Principal at Suitable Life, a financial life planning firm that helps property investors gain answers to some of the most important life and financial questions, making him perfectly placed to give us a well-rounded perspective of the HMO model as an investment vehicle.

Jon’s comments tell us that due to strong demand for quality rental accommodation and increasing rental rates, so long as purchase and refurbishment costs are kept under control, HMOs stack up very favourably compared with alternative investments.

“There’s no getting away from the fact that it is harder than it was. The HMO business model is a three-part equation – cost to buy, cost to refurb, versus rental returns,” says Jon.

“What we’ve seen over the past 10 years is good capital growth, with a further significant upswing post pandemic, and rising costs of refurb.”

While capital growth has accelerated in 2022, with house prices rising at their highest rate to 14% in the year to June, Jon believes a potential slowdown in price growth could occur in tandem with further growth in rents.

Capital growth and rising rental returns

“The outlook for capital growth looks a little uncertain over the next few years,” he says.

“And if there is a pause, or even a reverse (which some are predicting), and rental growth accelerates, returns will improve.

My crystal ball is a bit foggy in the current climate, but I believe the growth in capital gains will inevitably slow and come to a halt for a period of time, although I don’t think there will be a massive correction… From our recent experience, rental growth is extremely strong – we’re looking at a year-on-year increase of 10-15% in some cases and it seems set to continue.”

Jon’s experience of rising rental rates is supported by Rightmove data released this month which shows that rents are rising at their fastest pace in 16 years of reporting, with average asking rents outside London rising 3.5% from just last quarter and up 11.8% on last year.

HMO occupancy at an all-time high

So, what’s behind the rental growth, and is it likely to continue? Well, at the heart of it is simply supply and demand.

From a Rightmove report released this month, available rental stock across the UK is still down 26% compared with last year, while demand is up 6%.

All of which means competition between tenants for good quality housing remains fierce. Occupancy data from the Platinum network of more than 4500 rooms shows demand for high standard co-living accommodation has never been stronger, with the average 12 month rolling occupancy rising from a pre-pandemic 94% to a high of 96% in July 2022. Some of the Platinum landlords are experiencing such high demand that they have started waiting lists for housemates who are keen to be kept informed about up-coming vacancies.

Supply vs Demand

So, demand is high but what is behind the issue with supply and is there still opportunity for new and existing investors? Looking at the HMO sector specifically, on an annual basis, the number of HMOs in England has fallen by 3% since 2019 from 511,278 in 2019/2020 to 497,884 in 2020/21.

This was driven, in part, by the 2018 government requirement for all properties occupied by five or more people from different households to have an HMO license and meet the required standards.

This caused many amateur landlords to exit the market, but Jon believes that there was something else at play…


“From around 2013/14 onwards the ‘rent-to-renters’ entered the market” he says.

Rent-to-rent is when a landlord rents out a property to a tenant on a single let basis. This tenant will rarely live at the property and will be free to sub-let its rooms as they see fit, including, with the proper license, as an HMO.

“Instead of a large deposit and hefty refurb cost, a rent to renter could set up an HMO with just the initial rental deposit and monthly rent plus a small investment to get the property furnished and up to legal HMO standards.

However, when Covid-19 hit, we discovered that the rent-to-rent HMO business model was nothing like as robust as the owned-outright one. The fact that many of them have exited the sector post-pandemic has had a real effect on the supply and demand dynamic we are seeing now.”


“Through Covid-19, the HMO model has proven very robust compared with buy-to-let,” says Jon.

“In my experience, plenty of BTL landlords saw no rent being paid by their tenants (mostly just one family unit). As the pandemic continued, financial challenges were exacerbated and rent arrears often turned into bad debts which landlords struggled to recoup.”

“HMO-owner landlords on the other hand, were not impacted in the same way.”

The Platinum HMO model

For a typical 6-bed property, landlords will still be in profit with up to two rooms empty. And in most cases should break even with a further void - making the model very suitable to weather the inevitable storms that come along from time to time!

This meant that during the pandemic, if HMO landlords had periods where some tenants could not pay, then they were not having to personally fund the mortgage payments like their single family let counterparts.

The Platinum HMO model is structured with a good margin to buffer against potential voids and the network were well supported to navigate the many changes, with most Franchise Partners retaining strong occupancy levels throughout.

With further increases to energy costs due later this year, we are expecting even more renters to consider the shared living model where typically the cost of bills is included in the fixed rental payment.

The HMO investment model: if not property, then what?

Of course, the big question for any potential investor is: Where should you invest your money?

In a turbulent market, the HMO investment model remains what we like to call ‘boringly predictable’.

With the right support and guidance, it’s a steady, reliable and low risk income-based strategy benefitting from strong long term capital growth.

“Both the Equity and Bond markets are volatile at the moment,” says Jon.

“The average 60/40 tracker fund has lost 10-15% since December 2021. So, for someone who has money to invest in the current climate, I would ask if not property, then what?

And if you are looking to invest in property, then HMOs will always beat buy-to-lets on yield and robustness.”

A brave new world

Taking the above into consideration, despite all the market changes, whether it be property prices, the cost of refurbishment, increased operational costs and continued changes to legislation, demand for HMO living is higher than ever.

For aspiring or existing investors considering HMOs, Platinum encourage you to consider what you are hoping to achieve from your investment. If you’re looking to protect and grow your capital and generate a strong and resilient income, with the right guidance and support HMOs could be your perfect next investment.