10 Reasons to Avoid Investing in London HMOs
October 28, 2025
10 Reasons to Avoid Investing in London HMOs
At Foot Forward Properties, we have over 23 years of experience developing and managing HMO properties across the North of England. Over those years, we have seen countless investors from the South make the same realisation: London HMOs simply do not stack up anymore.
On a weekly basis, we are approached by southern-based investors who are either buying their first HMO property in the North or shifting their entire portfolio northwards. The reason is simple. They are tired of minimal capital growth, poor yields, and high entry prices that crush returns.
Below are ten clear reasons why you should avoid investing in London HMOs and look toward high-yielding Northern markets such as South Yorkshire, where the numbers make sense and long-term growth is real.
1. Minimal Capital Appreciation
Capital growth in London’s property market has slowed dramatically. Most London HMOs have seen stagnant or minimal appreciation over recent years. Compare that to the 7 percent capital appreciation we are consistently achieving in the areas we develop, such as Doncaster, Sheffield and Rotherham.
Northern towns still have room for growth, supported by regeneration and improving infrastructure, while London has largely peaked.
2. High Barrier to Entry
The cost to enter the London market is simply too high. A modest HMO in London can easily exceed £800,000, whereas you can buy two or three fully refurbished HMOs in South Yorkshire for the same amount.
When you overspend on the purchase price, your ROI shrinks, and it takes years just to recover your capital. For smart investors, it makes far more sense to invest where the barrier to entry is lower and returns are higher.
3. Planning is a Nightmare
Planning permission for HMOs in London is one of the toughest in the UK. The Home Builders Federation even went as far as to label London a “No Go Zone” for developers due to its crippling red tape.
Many boroughs have introduced Article 4 Directions, which remove permitted development rights and make HMO conversion near impossible. By contrast, councils across South Yorkshire remain open to responsible HMO development, provided standards are met.
4. Far Higher Rental Yields Up North
London investors struggle to achieve more than 4 to 5 percent gross yields. Meanwhile, South Yorkshire HMOs regularly deliver between 9 and 10.5 percent net yields, even after management costs.
This difference alone highlights how much stronger Northern returns are. When property prices are affordable, your rent covers far more, leaving genuine cash flow every single month.
5. Stronger and More Stable Tenant Demand
London’s rental market is often seasonal and volatile, heavily influenced by luxury tenants and corporate relocations. In contrast, South Yorkshire HMOs benefit from stable, year-round demand from working professionals, contractors, and key workers employed in logistics, healthcare and manufacturing.
This steady demand keeps occupancy high and voids low, ensuring consistent monthly returns.
6. Better Long-Term ROI
When you combine high NET Yields with steady capital appreciation, Northern HMOs outperform London every time.
An investor in South Yorkshire could easily see a total ROI exceeding 16 percent per annum, while London investors would be lucky to achieve half of that. The North delivers strong income now and dependable growth later.
7. Lower Void Periods
Vacancy rates are far lower across Yorkshire. Affordable rents keep properties full, and our in-house lettings team works proactively to maintain near 100 percent occupancy levels.
In London, inflated rents often lead to longer voids, and properties can sit empty for weeks between tenants. Every empty week eats directly into your returns.
8. More Predictable Regulations
London’s boroughs all have their own rules, licensing processes, and planning restrictions. The result is confusion, delays, and added cost.
In South Yorkshire, councils tend to apply clear, transparent licensing procedures that encourage compliant, high-quality HMO development. We have maintained a 100 percent success rate in securing HMO licences on the properties we develop and manage.
9. Lower Operating Costs
Refurbishment, maintenance, utilities, and management costs are significantly cheaper in South Yorkshire. Lower costs mean higher NET profits.
At Foot Forward, our back-to-brick refurbishments ensure energy-efficient, low-maintenance HMOs that reduce ongoing expenses, protecting investors from future cost increases.
10. Easier to Scale Using Leverage
Because the purchase prices are lower, investors can scale their portfolios faster using commercial finance and refinancing strategies.
By releasing equity from one high-performing HMO, you can reinvest into the next, compounding your growth over time. That kind of scaling is almost impossible in London, where one purchase can tie up all available capital.
Final Thoughts
London once looked like the prime place for property investment, but the reality for HMO investors today is very different. Low yields, high costs, complex planning, and minimal appreciation make it a poor choice for returns-focused investors.
In contrast, South Yorkshire continues to outperform on every level — yield, growth, affordability, and scalability. That is why so many London-based investors are moving north and partnering with experienced developers like us.
If you are ready to explore high-yielding, fully managed HMO investments, speak to our team today at www.footforwardproperties.co.uk/hmo-for-sale.
We handle everything from sourcing and development to licensing and management, ensuring your investment is hands-free, fully compliant, and profitable from day one.
Frequently Asked Questions About London vs South Yorkshire HMOs
Are HMOs in London still profitable?
In most cases, no. High purchase prices and strict planning restrictions mean yields are often below 5 percent. Once you factor in costs, returns are minimal. Northern HMOs offer far stronger cash flow and growth.
Why are investors moving their portfolios to the North?
Many southern-based investors are shifting north because property prices are lower, yields are higher, and the market still has room to grow. South Yorkshire offers better overall ROI and easier scalability.
Is it easier to get an HMO licence in South Yorkshire?
Yes. Local councils in South Yorkshire are known for clear, straightforward licensing processes. With Foot Forward’s experience and compliance track record, we handle the entire licensing process on behalf of investors.
How much capital do I need to invest in a South Yorkshire HMO?
Investors typically start from £280,000 to £315,000 for a fully refurbished, licensed HMO that is tenanted and income-producing from day one. That is a fraction of the cost of even a small flat in London.
What ROI can I expect on a Northern HMO?
Most investors achieve NET Yields between 9 and 10.5 percent, with capital appreciation of around 7 percent annually, leading to a combined ROI of over 16 percent per year.