HMO conversion costs average more than £82,000 across England, according to new research by residential property management specialist Rushbrook, which also found more than 2,500 licensed HMOs on the market for investors who would rather skip the conversion process.
Rushbrook analysed HMO listings across England using PropertyData, and combined them with estimated conversion costs based on regional construction costs and the average number of bedrooms in existing HMOs.
Conversion costs
The research puts the cost of converting a property into an HMO at about £15,300 per bedroom on average. With the average HMO at 5.37 bedrooms, that gives a total of about £82,000.
London is the most expensive region at about £92,800, based on £18,000 per bedroom and an average of 5.15 bedrooms. The South East follows at £90,600, and the South West ranks third at £89,700. The North East is cheapest at £71,000, ahead of the North West (£73,100) and the East Midlands (£74,500).
Total investment
Conversion makes up only part of the initial outlay for landlords entering the HMO market. Rushbrook estimates the average cost of buying an eligible three- or four-bedroom property and converting it at £532,000 across England, split between a £450,000 purchase price and £82,000 in conversion costs. London has the highest total at £957,000, followed by the South East at £630,000 and the East of England at £557,000.
Existing HMOs
Landlords who prefer to buy an existing HMO have 2,507 licensed listings to choose from across England, at an average asking price of about £340,000. The South East has the most listings with 478, or 19.1% of the total. The East Midlands follows with 416 (16.6%), then the North West with 309 (12.3%) and the South West with 304 (12.1%).
Asking prices for existing licensed HMOs vary widely by region:
- Yorkshire and the Humber has the lowest average at £203,000, followed by the North West (£212,000) and the North East (£220,000)
- London has the highest at £764,000, followed by the South East (£437,000) and the East of England (£413,000)
“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,” said Roma Sharma, managing director of Rushbrook.
“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.”
