What is an HMO? How Do I Convert My Property?

Thinking about converting a property into an HMO? It can be a great way to increase your rental income, but there are some important things to be aware of before you jump in.

Here you’ll find an overview of the legal requirements and the kind of building work you might need to carry out. 

We’ll also explain what makes a property suitable for an HMO and how to go about finding reliable tenants and setting up individual tenancy agreements.

1. The definition of an HMO
2. A quick guide to HMO conversion laws
3. The ultimate checklist for finding the best HMO property
4. How to prepare and manage your new HMO

The definition of an HMO

A house in multiple occupation (HMO)  is a property rented out to three or more people who aren’t from the same household and share essential facilities like a bathroom, toilet, or kitchen.

In this context, a household refers to either an individual or a family living together. Families include married couples, partners living together, relatives, half-relatives, and step-relationships, such as step-parents and step-children.

Put simply, if a property has more than three tenants who aren’t all related and they’re sharing facilities, it’s likely to be classed as an HMO, which comes with specific rules and responsibilities for landlords.

Large HMOs

A property is classed as a large HMO if it has five or more tenants from two or more households who share facilities like a bathroom, toilet, or kitchen.

Unlike smaller HMOs, large HMOs always come with extra licensing requirements, which landlords need to be aware of. We’ll cover those in more detail below.

A quick guide to HMO conversion laws

When converting a property into an HMO, there are two main legal things to keep in mind: getting the right planning permission and securing an HMO licence from your local council.

Planning permission

Whether you need planning permission for an HMO conversion depends on both the number of tenants and the local planning policies in place.

By default:

• HMOs with 3-6 unrelated tenants usually fall under C4 use class. In most areas, changing a property from a standard residential home (C3) to a small HMO (C4) is permitted without a full planning application. This is known as permitted development.
• However, if the property is located in an Article 4 area, this automatic right is removed, and you’ll need to apply for planning permission even for 3-6 tenants.
• HMOs with 7 or more tenants are always required to obtain full planning permission, regardless of location.

If you ever choose to revert the property back to a single household (C3 use), this often doesn’t require a new planning permission. Though it’s always wise to confirm with your local authority.

Planning rules vary significantly by council, especially in areas with high HMO concentration. It’s always best to speak directly with your local planning department to understand what’s required for your specific property and postcode.

---

You might also be interested in…

• All You Need to Know About Right to Rent Checks
• Guide to the Renters’ Rights Bill for Landlords 2025
• What Are the EPC Requirements for Landlords?
• Renting to Students: Guarantors, Advance Payments, HMO licence and more
• Holding Deposit, Tenancy Deposit, Rental Fees: Everything You Need to Know

---

HMO licensing

Whether you need an HMO licence depends on how many tenants you have and which local council your property is in. 

There are three main types of licensing schemes that might apply to your property:

• Mandatory licensing: This applies to all HMOs with five or more tenants from different households.
• Additional licensing: Some areas require all HMOs to have a licence – even smaller ones with three or four tenants from different households.
• Selective licensing: In certain places, all rented properties (not just HMOs) need a licence.

Licensing rules can vary a lot depending on your location, so it’s important to check with your local council to find out what applies to you.

For more information on property licensing in 2025, check out our detailed landlord guide here.

The ultimate checklist for finding the best HMO property

1) Choosing the right property

Picking the right place is the first step to a successful HMO. Bigger properties usually mean more rooms to rent out, which can boost your earnings, but it’s not just about squeezing in as many bedrooms as possible.

Unlike a family home where people spend time together in the lounge or kitchen, HMO tenants often keep to themselves – especially if they’re not friends, or don’t know each other. A good-sized bedroom can make a big difference.

That’s why older homes like Victorian or Georgian ones are often great choices. They come with bigger rooms, high ceilings, and extra spaces you can get creative with. Maybe turn a dining room into another bedroom, or split a large room into two en suites. Those wide hallways, utility rooms, and gardens can be used to make communal areas more comfortable, or even fit in an extra room.

The key is finding a good balance between private space and shared areas that don’t feel cramped. Most landlords find that five tenants is the sweet spot – enough to cover your costs and still make a nice profit.

2) Whole house or room-by-room?

Once you’ve found the right property, the next big choice is how to let it. You can either rent the whole house to a group under one agreement or rent out each room separately.

For smaller HMOs, say three bedrooms, letting to a group of friends or students who already know each other can work well. A joint tenancy can make things simpler for everyone.

But when you have more than five bedrooms, finding a big group wanting to live together can get trickier. That’s why most landlords with larger HMOs prefer letting rooms individually. It gives you more flexibility, helps keep all rooms occupied, and tends to attract working professionals looking for a single room rather than a whole house.

At OpenRent, we make this hassle-free and affordable with smarter room listings. You can advertise each room separately but manage everything from one place. Plus, with Rent Now, you can create individual tenancies for each room – using just one credit, as long as the rooms are in the same property. It’s an easy way to enjoy all the perks of room-by-room letting without extra hassle or cost.

3) Location, location, location

No matter how well your HMO is set up, location can make or break your success. A great property in the wrong area will struggle to attract tenants. So it’s important to think about who you’re targeting and what they need from the neighbourhood.

If you’re aiming to rent to young professionals, location really matters. Most will be relying on public transport and will want to live close to work, amenities, or a lively town centre. A good rule of thumb? Look for properties within a 15-minute walk of a tube or train station, bus routes, or the high street. Proximity to shops, gyms, cafés, and takeaways can also make a property more appealing.

Students are a bit different. They’ll most likely prioritise being near campus or on good transport links to their university. Some may also want to be close to nightlife or student-friendly spots.

Put yourself in your tenants’ shoes: what would you want if you had no car, a new job, or were moving to a new city? Once you know your target group, choosing the right location is much simpler.

4) Getting more for less

If you’re looking to buy an HMO property, your budget will shape many of your decisions, like location and size. In some cases, the ideal HMO property might be out of reach in higher-priced areas. But there are smart ways to stretch your money without compromising on what tenants want.

One strategy is to focus on areas less popular with families. Properties outside top school catchments tend to be cheaper – and that’s fine for HMOs, since young professionals and students usually don’t prioritise schools. This can open doors to more affordable spots that still attract your target tenants.

Another option is to seek out properties that are a little dated and in need of cosmetic improvements. As long as the structure and layout are sound, a fresh lick of paint, some modern fittings, and a good tidy-up can go a long way and add real value.

The bottom line? You don’t need to overspend to secure a solid HMO investment. By being strategic about who you’re renting to and where you’re buying, you can uncover great properties that others might miss.

5) Think like your target tenants

It’s easy to choose a property based on what you like but what matters most is what your future tenants would want. 

If you’re planning to rent to people in their 20s, but haven’t lived like that for a while, do a bit of digging. Ask younger friends or family what kind of areas they’d want to live in, or even check out local forums and social media groups to see which parts of town are most popular.

Students will want to be close to the university, student bars, and cheap food spots. Young professionals, on the other hand, might prefer quieter streets, decent transport links, and quick access to the town centre or business hubs.

The better you understand your target market, the more likely you are to choose a property and a location that meets their needs. And when your tenants are happy, your rooms stay filled and your investment works harder for you.

How to prepare and manage your new HMO

1) Assess the condition of the property

Like any rental, your HMO needs to be safe and in good condition. Assuming the building is structurally sound, well-ventilated and free from damp, your biggest job will be dividing it into suitable bedrooms.

How many rooms you can create depends on how well the shared areas can support your tenants. Ideally, you’ll have more than one bathroom, a kitchen that’s big enough for everyone, and if possible, en suites in some rooms. These are a real draw when tenants don’t know each other.

Room sizes matter, too. Legally, any room for one person over 10 years old must be at least 6.51 square metres. For two people, that rises to 10.22 square metres. Local councils may set higher minimums, so always double-check.

Fire safety is non-negotiable, too. You’ll need smoke alarms, fire extinguishers, emergency lighting, and clearly marked exits. Carbon monoxide detectors, lockable bedroom doors, and pest control should also be on your list.

Finally, consider hiring a cleaner for communal spaces. They can keep the property looking its best and give you regular updates, especially useful for checking alarms and spotting early issues.

2) Find tenants and set up tenancies

Once your HMO is ready, it’s time to find tenants. Unlike a single let, you’ll be managing multiple people – sometimes as a group, sometimes individually – so choosing the right tenancy setup is key.

Option 1: One joint tenancy

If you’re letting to a group who already know each other (like students or friends) you might prefer a joint tenancy. All tenants sign the same agreement and share responsibility for the rent and property.

This setup is simple to manage, with one contract, one rent payment, and one deposit. With our Rent Now premium tenancy creation service, we’ll create the tenancy, handle referencing, register the deposit, and collect the rent.

Option 2: Room-by-room tenancies

For larger HMOs, or where tenants don’t know each other, it’s usually better to let rooms individually. This gives you more flexibility and reduces the risk of void periods, as one person leaving doesn’t affect the rest.

3) Budgeting and understanding returns

Like any investment, your HMO should be treated as a business. Start by figuring out how many tenants you can fit in and how much rent each one will pay – this will help you work out what kind of return to expect.

Once you factor in the purchase price, conversion costs, and any expenses to meet local authority standards, working out your yield becomes a lot simpler.

In many areas, aiming for a gross yield of around 8-10% can be a reasonable benchmark, though this will vary by location, property type, and strategy. Just remember, your net yield will be a bit lower once you factor in mortgage payments, insurance, maintenance, agent fees (unless you use OpenRent), and other ongoing expenses.

When planned carefully and managed well, an HMO conversion has the potential to generate solid returns. Success also depends on complying with local regulations, meeting the expectations of your target tenant group, and keeping the property in good condition over time.

Using a platform like OpenRent can simplify finding tenants, managing contracts, and collecting rent, freeing you up to focus on growing your property portfolio.

---