HMO bridging finance: How it can support your property investment plans

hmo bridging finance

Houses in multiple occupation (HMOs) can present property investors with a unique opportunity. As housing costs jump, and student numbers rise, we’re seeing more demand for these types of properties. But, unlike other forms of buy-to-let assets, HMOs come with additional responsibilities and regulations.

As such, if you plan to move into this field and utilise HMO bridging finance, you’ll want to make sure you’ve got all your ducks in a row. You’ll also want to work with a lender who understands the complexities of this niche sub-sector.

To help you get up to speed, this blog breaks down what you need to know about HMOs. We’ll also explore how specialist finance could support your property investment goals.

What is a HMO?

A property is considered an HMO if it has at least 3 tenants living in it, forming more than 1 household, and they share facilities within the home. This includes toilets, bathrooms, and kitchens. A home will be considered a “large” HMO if there are at least 5 tenants sharing the space.

In early 2018, there were an estimated 497,000 HMOs in England and Wales. This number has varied since then as the government tweaked legal definitions, and the governing legislation.

More recent data suggests these changes have limited availability. Between 2019/20 and 2020/21, the number of HMOs in England fell from just over 511,000 to around 498,000.

Source: House of Commons Library,, Property Reporter

Why should you care?

The market is desperate for more stock. HMOs could prove beneficial for tenants and property investors alike.

There is a “chronic” lack of available rental homes at the moment, according to Zoopla. Currently, the typical UK estate agent has just 8 homes available to rent. This is half the pre-pandemic average of 16. We need more rental options to stabilise the market. On this, rising demand for HMOs could emerge.

Students are key utilisers of HMOs. And more youngsters are heading off to university than ever. In the 10 years to 2021, student enrolments, for both undergraduates and postgraduates, rose from 2,503,010, to 2,751,865. Between 2021 and 2022, we also saw higher education acceptances rise. At the same time, entry rates among UK 18-year-olds reached record highs. But, these students may struggle to find suitable accommodation over the coming years. We’re on track to face a shortfall of around 450,000 student beds by 2025, according to StuRents.

It could be relatively easy for property investors to take advantage of this with HMO bridging finance. New census figures show students have an increasing preference for “communal establishments”. Also, council tax changes could be on the way for HMOs, which may make them even more desirable for students. This could all benefit property investors, who often generate higher yields with HMOs than they do with other rental options.

Source: Zoopla, Property Reporter, House of Commons Library, Property118, Best Advice, Property Investor Today

hmo student residents

Where could you look for opportunity?

HMO bridging finance can only be best utilised by those who know where to look. In 2021, the national decline in HMOs was driven primarily by London. Here, the total amount of HMOs fell by 13%. This may be a wasted opportunity – the capital is a major university hub for both domestic and overseas students.

There are a number of other cities across the UK that are also desperate for increased supply. Student accommodation costs are skyrocketing in certain hotspots. More options could help restore stability.

London is understandably the most expensive city, with average HMO accommodation costing around £250 a week. This is then followed by Cambridge (£191.74) and Bath (£191.39).

You may also want to target cities that are student favourites. According to reviews from students themselves, Newcastle upon Tyne, Liverpool, Cardiff, Sheffield, and Nottingham are the best of the best for budding scholars.

Source: Property Investor Today, The Intermediary, Student Crowd

How HMO bridging finance can help

Undoubtedly, property investors and landlords have faced immense pressure in recent months. Rising costs and economic uncertainty has led many to question the merit of investing at all. There have been countless headlines dedicated to how homeowners are exiting the market. But, much of this pessimism may be overblown.

Last year, 12.2% of properties sold in Britain were bought by an investor. This was the highest proportion of sales seen since 2016. Also, the number of landlords registering with lettings agencies jumped 9%.

There is still demand in the property market, which could rise further still in 2023. We have a long road ahead of us. But we’re slowly seeing signs of recovery in the economy. Inflation is starting to drop, and GDP is rising. If this continues, confidence could return.

But as optimism returns, so too will competition. If you want to get ahead of your rivals, you’ll need a lender who can provide HMO bridging finance that keeps up with the market. Our specialist finance products can help you jump on an HMO opportunity in more ways than one.

We have the standard products that can help you purchase an HMO property and expand your portfolio. You could utilise residential bridging loans and buy-to-let mortgages, which can be issued in mere days. Also, all our options are bespoke. They can be tailored to your circumstances.

We also have permitted & light development loans. These can help spruce up a property and potentially boost its value. Refurbishment finance can even help make properties greener, which could be worth consideration. Data suggests many tenants would be willing to pay a premium to live in an environmentally friendly home.

There are also large and complex loans available for those with big conversion projects on the horizon. In recent years, we’ve seen many empty offices turned into modern flats. Perhaps empty department stores or pubs could be converted into new HMOs?

If you plan to ramp up your property investment plans over the coming year, we want to hear from you.

Source: The Times, The Times, Reuters, Commercial Trust


MFS are a bridging loan and buy-to-let mortgage provider, not financial advisors. Therefore, Investors are encouraged to seek professional advice.

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