“You’ve spent months researching HMOs, watching YouTube videos, and crunching numbers. You finally take the plunge, only to realize you’ve overlooked something critical. Sound familiar?
Investing in HMOs (Houses of Multiple Occupation) can be incredibly rewarding. Higher cashflow, stronger returns, and a scalable investment strategy. But it’s also a steep learning curve, and many investors fall into the same traps when they start. We’ve been through the process with Mudpiper, and we’ve learned that avoiding these common mistakes can mean the difference between a profitable HMO and a costly headache.
Let’s break down the five biggest mistakes new HMO investors make, and how you can avoid them.
1. Underestimating the Costs of Conversion
Many first-time investors assume that turning a single-let property into an HMO is just about adding a few extra rooms and fire doors. In reality, it’s a major renovation project, and costs can escalate fast.
From planning permissions to licensing, fire safety compliance, and additional amenities (like en-suite bathrooms and communal spaces), every step adds to the budget. If you don’t factor these in, you could end up running out of funds before the project is even complete.
How to Avoid It:
- Get detailed quotes from experienced builders before committing.
- Allow a buffer of 10-20% in your budget for unexpected expenses.
- Research your local council’s HMO licensing and compliance costs before purchase.
2. Choosing the Wrong Location
Not every property makes a good HMO, and location is everything. A great single-let area doesn’t automatically mean strong demand for co-living spaces. Some investors rush into buying cheap properties, only to find that tenant demand is low.
How to Avoid It:
- Focus on areas with high rental demand, such as cities with large student populations, hospitals, or major employers.
- Check spare room listings and Facebook marketplace to gauge demand before committing.
- Research local HMO saturation: some councils impose Article 4 restrictions, limiting new HMOs in certain areas.
3. Underestimating the Value of High-End Design
While some investors believe tenants only care about affordability, we’ve found the opposite to be true in our Manchester projects. High-quality finishes attract better tenants, command higher rents, and lead to lower turnover.
In areas like Stockport where we operate, offering a premium living experience sets your property apart. Think of it as more than just a room, it's a lifestyle choice. And tenants are willing to pay for it.
How to Maximise It:
- Invest in stylish, durable materials that hold up over time but elevate the space.
- Create a sense of home: feature walls, coordinated colour schemes, and modern furnishings all play a role.
- Don’t skimp on the details: a great first impression leads to faster lets and tenant referrals.
4. Ignoring the Importance of Property Management
Managing an HMO is not the same as managing a single-let. With multiple tenants, communication, maintenance, and tenant turnover all increase. Many investors assume they can handle it themselves, only to find they’re drowning in admin and tenant issues.
How to Avoid It:
- Decide early on whether you want to self-manage or use an HMO specialist letting agent.
- Set clear house rules from day one to avoid unnecessary disputes.
- Invest in good property management software to streamline rent collection and maintenance tracking.
5. Waiting Too Long to Take Action
One of the biggest mistakes? Overthinking everything and never actually starting. Many would-be investors get stuck in “analysis paralysis,” spending years researching without ever buying their first HMO.
The reality is, there’s no such thing as the “perfect time.” The best investors take calculated risks, learn from experience, and adapt along the way.
How to Avoid It:
- Set a clear timeline for your first purchase, give yourself a deadline.
- Connect with other HMO investors and learn from their experiences.
- Start small if necessary - your first HMO doesn’t have to be a 10-bed mansion.
Final Thoughts
Every investor makes mistakes, it’s part of the journey. The key is to minimize risk, stay informed, and take action. At Mudpiper, we’ve learned that a well-executed HMO strategy is one of the best ways to build long-term cashflow and financial freedom.
If you’re serious about investing in HMOs, the best thing you can do is start—but do it with the right knowledge, the right team, and the right plan.
The 5 Biggest Mistakes New HMO Investors Make