Are HMOs still a good investment in 2026?

August 12, 2026

We have been in the HMO space for over 34 years now, which is quite a good way to make us feel old.

In that time, we have just about seen everything. Regulatory changes. Property booms and crashes. Hype cities appearing almost overnight. More Prime Ministers than we would care to admit. The rise of rent-to-rent, which thankfully seems to have lost much of the shine it once had (this is a good thing!). Cheap money, expensive money, aggressive refinancing, changing tenant expectations, new licensing schemes and plenty of property investment trends that were apparently going to change the industry forever.

Most disappeared eventually.

One thing we have never changed our minds on is this: HMOs are a fantastic property investment when they are bought, developed and managed properly.

We believed that decades ago, and we still believe it in 2026.

There is perhaps no stronger indication of that than the fact that Foot Forward Property Investments invests in HMOs ourselves. We are not simply selling developments to investors and walking away. As a business, we are prepared to put our own money into the same type of properties and developments that our investors purchase.

That speaks volumes.

HMOs have changed. That does not make them a bad investment

The HMO market of 2026 is not the HMO market of 2016, let alone the market we first entered more than three decades ago.

The days when somebody could buy an ordinary terraced house, squeeze as many bedrooms into it as physically possible, stick a few locks on the doors and call themselves an HMO investor are disappearing. Frankly, good riddance.

Professional standards are higher. Licensing is more widespread. Planning restrictions have become more significant in many local authorities. Mortgage lenders are paying greater attention to the quality and experience of operators. Tenants themselves expect far more from their accommodation.

Paragon Bank has described the shift clearly:

“However, tighter regulations, increased licensing, Article 4 planning directions, and shifting compliance rules mean profitability heavily favors professional operators over casual landlords.”

That sentence gets to the heart of HMO investment in 2026.

HMOs have not stopped working. Badly executed HMOs have become harder to get away with.

For professional operators, that is not necessarily a bad thing.

Professional operation matters more than ever

This is where companies such as Foot Forward Property Investments come in.

We fall firmly into the professional operator category because we handle the full HMO investment process rather than simply introducing an investor to a property and leaving them to figure everything else out.

We source properties, including opportunities purchased below comparable market values where suitable. We then carry out the refurbishment and conversion into a fully compliant HMO, with bedrooms and communal areas designed well beyond the bare minimum noted within the HMO space.

We are not interested in squeezing six microscopic bedrooms into a house because a spreadsheet says it produces another few hundred pounds of rent.

We are not slum landlords.

A good HMO should be somewhere people actually want to live. Larger rooms, sensible layouts, strong communal spaces, good kitchens, proper bathrooms, appropriate fire safety systems and a professional standard of finish all matter. Better houses tend to attract better tenants and give those tenants a reason to stay.

Once the development is complete, we can manage the property on behalf of the investor too.

For our investors, that means one company can oversee the property from acquisition and development through to ongoing operation. They are not trying to learn planning policy, licensing, building regulations, HMO management and tenant acquisition from scratch while simultaneously putting hundreds of thousands of pounds into their first project.

We have spent more than 34 years doing it.

There is quite a difference.

In 2026, the developer matters more than ever

One thing we would add in 2026 is that choosing the right developer has become just as important as choosing the right property, or the right area… or the right tenants.

When investors choose Foot Forward Property Investments, they are not dealing with a newly formed company experimenting with someone else’s capital. They are working with a business that has a proven track record of developing and managing HMO properties over decades.

Everything is handled in house.

Planning. Accountancy. Development. Management. Maintenance. Registration.

We do not build a sales operation at the front and then rely on a string of external companies behind the scenes to actually deliver the investment.

That matters because HMOs are not simple assets. They touch planning, licensing, building control, fire safety, management, finance, maintenance and tenant compliance. When too many parts of that process are outsourced, accountability becomes blurred very quickly.

If something goes wrong, who owns up it… and who puts it right?

With us, that answer is simple.

We do.

There are also far more new HMO developers appearing now than there were a decade ago, and some of them have very little meaningful track record. Investors need to be careful here.

A polished website is not evidence of experience.

A slick brochure is not a balance sheet.

And a founder story about buying one property, refinancing it, pulling all their money back out and somehow owning six more without putting another penny in is not a substitute for years of proven performance.

Too much of the property industry has become marketing first and property second.

Investors should be asking harder questions.

How long has the company actually existed?

How many HMOs has it developed?

How many does it manage?

What does its Companies House filing history look like?

Does the company have meaningful financial backing?

Does it retain assets itself?

Does it have the cash reserves to deal with problems when they arise?

Those questions tell you far more than a glossy website ever will.

Investors should not be guinea pigs

One of the things we find particularly worrying is the amount of creativity creeping into HMO investment structures.

Some developers are effectively using investors as guinea pigs while they test models that only work if every single part of the deal lands perfectly.

That should make people nervous.

There are developers using investor capital to fund HMO developments that the developer ultimately wants to retain themselves, while promising the investor a guaranteed return that depends heavily on the property refinancing at an extremely strong valuation.

That is a dreadful structure in our view.

If the valuation comes in exactly where expected, the refinance completes on time, the lender accepts the rental assumptions, the interest rate remains manageable and nothing unexpected happens during the development, perhaps it works.

In other words, it needs the sun shining on the left-hand side of the UK at exactly 12:00 on a Wednesday while it is 23 degrees outside.

You know what we mean.

Too many things need to go right.

If the final valuation comes in lower than forecast, where does the money come from to repay the investor?

If refinancing is delayed, who funds the promised return?

If build costs run over, what happens then?

If lending criteria change halfway through the development, does the structure still stand up? (which happens all to often)

An investment should not rely on a chain of perfect outcomes to make everybody whole.

There does not need to be a clever, questionable new way of investing in HMOs every six months.

Stick to what works.

Buy a proper asset. Use sensible leverage. Work with an experienced developer. Make sure the property itself stacks up. Make sure the developer has the financial strength to deliver it. Then manage the house properly.

Property does not need financial theatre.

Check the developer, not the marketing

One of the simplest things an investor can do is look past the sales material and check the company behind it.

Companies House is a useful starting point.

If somebody tells you they have years and years of experience, yet the company they are asking you to invest through was formed two years ago and has a few thousand pounds sitting on the balance sheet, you should be asking questions.

There may be a perfectly reasonable explanation.

But ask.

The same goes for developers describing themselves as “award-winning”.

The property industry has no shortage of small awards, paid-entry awards, sponsor-led awards and ceremonies that very few people outside the room have ever heard of.

An award does not automatically mean a developer is good.

Far more useful is a long trading history, a substantial number of completed developments, managed properties that investors can actually see, proper financial backing and a business that has survived several different property cycles.

That is what we would look for.

It is also what we have built ourselves.

Our financial position is visible. Our trading history is visible. Our development history is visible. Our management operation exists in the real world, not just in a pitch deck.

That matters far more to us than a trophy on a shelf.

“Boring is the new brilliant”

One phrase we use a lot when talking about HMO investment is this: “Boring is the new brilliant.”

It probably does not sound particularly exciting. That is the point.

We have never understood the obsession with creating boutique, designer HMOs filled with expensive finishes, complicated features and materials that look fantastic in photographs but become a headache the moment tenants start actually living in the property.

A rental property is an operating asset.

Every specialist fitting, premium surface, unusual light fitting or designer finish eventually needs cleaning, repairing or replacing. If a standard replacement costs £50 and the designer version costs £300, that difference gets repeated across an entire portfolio over many years.

There is a sensible middle ground.

Our HMOs are finished to a very good standard. They are attractive, modern and somewhere tenants genuinely want to live. But they are also designed around the reality that they need to be managed and maintained for years.

Durable flooring. Good quality kitchens. Sensible bathrooms. Proper furniture. Strong finishes. Straightforward replacement parts.

Fantastic houses, without unnecessary theatre.

That same principle applies to location.

We do not chase trophy cities simply because everybody is talking about them. Nor do we feel the need to buy in prestigious neighbourhoods just so an investor can say they own a property there.

The property still has to make financial sense.

For us, areas across South Yorkshire have provided exactly what we look for. Established rental demand, sensible property values and a long operating history that allows us to judge performance using actual evidence rather than speculation.

We know these markets because we have been working in them for decades.

That gives investors something far more useful than hype: a long track record.

Sensible refinancing still has a place

Being cautious about aggressive BRRR strategies does not mean refinancing itself is a bad thing.

Done properly, refinancing is still a perfectly sensible way to release some capital and continue growing a property portfolio.

The important word is sensible.

We develop properties to a strong standard, improve the underlying asset and look for realistic refinancing opportunities without trying to manufacture enormous valuations simply so every penny of capital can be dragged back out.

Money remains in the deal.

The investor retains meaningful equity, meaning that you aren’t overleveraged, and any new lenders would be interested in talking to you.

The mortgage remains manageable.

Some capital may then be released to help fund the next investment without loading the original HMO with an unnecessarily large debt burden.

That is the kind of portfolio growth we believe in.

It is slower than the “buy ten properties in twelve months with none of your own money left in them” version of property investing that became so popular online.

Good.

Our approach has worked for more than 34 years and survived just about every storm property investors have been asked to deal with during that time.

Recessions. Housing market crashes. Interest-rate shocks. Regulatory changes. Tax changes. Political upheaval. Lending restrictions.

We are still here, and the HMOs are still producing excellent rent.

Sometimes boring really is brilliant.

The “all money out” BRRR obsession is finally fading

One property trend we are particularly happy to see losing momentum in 2026 is the obsession with so-called “all money out” BRRR deals (Buy, Refurbish, Rent, Refinance)

For years, property social media was filled with deals apparently allowing somebody to buy a property, refurbish it, refinance it at a dramatically higher valuation, pull virtually every penny of their initial capital back out and immediately repeat the process.

On paper, you could build a huge portfolio with very little money left in each property.

It sounded brilliant.

Until the debt became expensive.

Many property deal packagers actively marketed HMOs around this model, sometimes relying on extremely ambitious end valuations supported by equally ambitious rental assumptions. Investors were encouraged to extract as much capital as possible because having money left in a property was presented almost as a failure.

We have never agreed with that approach.

With the HMO investments we develop, money is deliberately left in the deal.

That is sensible investing.

Leaving equity in a property reduces leverage, reduces the mortgage burden and gives an investor far more breathing room when interest rates, rents or operating costs move against them.

The alternative can look impressive on a portfolio spreadsheet because an investor owns a large number of properties. The problem is that the bank effectively owns a very large percentage of every one of them.

A £4,000 monthly HMO income sounds attractive until an oversized mortgage, management costs, utilities, maintenance, insurance, licensing, repairs and voids have taken their share.

Portfolio size means very little if the properties barely generate cash.

Overleveraging has caught up with people

Cheap refinancing encouraged some investors to treat debt almost as free money.

It was not.

Investors who refinanced aggressively based on inflated valuations could justify taking enormous mortgages when borrowing costs were exceptionally low. Once those loans needed refinancing in a very different interest-rate environment, the mathematics changed quickly.

Suddenly, that enormous valuation was not quite as exciting.

The mortgage payment mattered more.

This is why we would rather see an investor leave sensible equity in an HMO and own a financially healthy property than boast about having extracted every penny from it.

Property investment should survive difficult markets, not merely look clever during easy ones.

Stop buying HMOs because somebody says a city is “booming”

Another positive development in 2026 is that more investors are beginning to question the idea that certain cities automatically make good HMO locations.

For years, Liverpool, Manchester and Newcastle and other relatively comparable cities have been heavily promoted to property investors. We believe investors need to approach all three far more carefully than much of the property marketing industry suggests.

That does not mean every HMO in those cities is bad. Of course not. A good street can exist within a difficult market, and a strong property can perform in a city with substantial competition.

But buying simply because a deal packager tells you that a city has “massive regeneration” is not investment research.

Liverpool and Manchester

Parts of Liverpool and Manchester have seen very high concentrations of HMO and shared accommodation development.

When too many operators chase the same tenant demographic, the result is fairly predictable: more competition, greater pressure on rents and a higher chance of bedrooms sitting empty.

This became particularly noticeable where developers and deal sellers heavily marketed properties to overseas investors who had little knowledge of the individual streets they were buying on.

The sales pitch was often familiar.

Huge regeneration.

Massive tenant demand.

Universities nearby.

Prices going up.

Buy now.

Yet an HMO is not an investment in a city-wide regeneration headline. It is an investment in one specific property, on one specific street, competing against other rooms within a very small local catchment.

That distinction matters enormously.

Newcastle has its own problems

Newcastle is another market where cheap purchase prices have attracted investors from across the UK and overseas.

Cheap houses look fantastic in a spreadsheet.

A property bought for £100,000 producing £25,000 or £30,000 of annual rent appears far more attractive than an expensive house producing the same income.

But there is usually a reason property is cheap.

Parts of the Newcastle market suffer from substantial deprivation, limited owner-occupier demand and significant concentrations of rental and HMO stock. Buying another cheap HMO in an area already filled with cheap HMOs does not suddenly solve those problems.

Sometimes it makes them worse.

If tenants have ten comparable rooms available within a few streets, the landlord loses pricing power. When demand softens, operators start competing through lower rents, incentives and increasingly expensive room specifications.

The cheapest property is rarely automatically the best investment.

Student heavy HMO Strategies should be approached with far more caution

Student-heavy HMO strategies deserve far more scrutiny in 2026. In our view, the Renters’ Rights Act has seriously damaged the traditional student-let HMO model and removed much of the certainty landlords historically relied upon. The straightforward days of signing a group for a fixed academic term and planning the following year around a clear end date have largely gone.

There is now a specific possession ground for qualifying student HMOs, but the process is more restrictive and comes with conditions and notice requirements. Commercially, that makes an already competitive market less attractive. In many university towns, landlords are chasing the same relatively narrow tenant pool, often at the same time of year, while also competing with purpose-built student accommodation. The result can quickly become a race to the bottom over who offers the cheapest room, the most bills included or the biggest incentive.

We have always focused on professional tenants instead. The potential tenant pool is far larger and demand is spread throughout the year. We can target graduates, NHS staff, engineers, teachers, office workers, contractors, managers and people relocating for work, rather than relying on one university population and one academic letting cycle.

Professional HMOs can also compete on quality rather than price alone. Room size, en-suites, communal areas, broadband, parking, transport links and proximity to major employment centres can all justify stronger rents and help attract tenants who actually want to stay.

On a slightly lighter side note, students were never really on our cards anyway. Anyone who remembers The Young Ones will understand the stereotype. Student houses can take some serious punishment, and the prospect of regularly dealing with battered furniture, damaged communal areas and a property that needs putting back together at the end of each academic year has never appealed to us.

For us, the Renters’ Rights changes simply reinforce the strategy we have followed for years: build well-designed HMOs for professional tenants, target a much broader market and compete on the quality of the accommodation rather than trying to win an annual race to be the cheapest.

The street matters more than the city

We have always believed HMO sourcing needs to happen at street level.

Not postcode level.

Certainly not city level.

Two properties half a mile apart can have completely different tenant demand, resale prospects, neighbouring property standards and achievable rents.

That is why we spend so much time examining where a property actually sits, who is likely to live there, what competing accommodation exists nearby and whether the purchase price makes sense without relying on heroic assumptions.

You cannot fix a bad location with quartz worktops and LED lighting.

So, are HMOs still worth investing in during 2026?

Absolutely.

We would hardly continue investing our own company money into them if we believed otherwise.

The opportunity has changed, though.

The strongest HMO investments in 2026 are unlikely to be the ones promising the highest theoretical ROI on an Instagram graphic. They are properties bought sensibly, developed professionally, financed conservatively and operated by people who understand what they are doing.

There should be equity left in the property.

The numbers should work without fantasy valuations.

The bedrooms should be large enough that somebody genuinely wants to live in them.

The location should be selected because tenant demand exists, not because somebody has put the words “regeneration hotspot” into a sales brochure.

And the developer behind the project should be financially strong enough, experienced enough and established enough to deliver what they are promising when things do not go perfectly.

Because things never go perfectly.

That is property.

For us, the model has remained surprisingly consistent for more than three decades: buy sensible properties in areas we understand, turn them into very good HMOs without creating an expensive maintenance nightmare, keep leverage under control, refinance responsibly where appropriate and manage them properly.

No complicated structures.

No reliance on perfect valuations.

No investor money being used as an experiment.

No need to reinvent property investing every year.

It is not the most glamorous property strategy in the world.

It has, however, survived everything thrown at it for over 34 years.

Boring is the new brilliant.

If you are considering an HMO investment and want to see the properties and developments we currently have available, visit Foot Forward Property Investments HMO Sales Page to view our HMOs for sale. You can see before and after photos by clicking the link here