Work out what an HMO really makes after bills: room rents and occupancy, utilities, management, licensing and finance, with yield, cash flow and the cash you need.
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The PROXERA property deal analyser is a free tool for stress-testing a deal before you commit, across every major UK strategy. Whether you are running a standard buy-to-let, a BRRR project (buy, refurbish, rent, refinance), an HMO, serviced accommodation or a rent-to-rent, it works the full picture: purchase costs, stamp duty, mortgage, cashflow, gross and net yield, cash-on-cash return and a five-year projection. Here are three short worked examples using realistic UK figures. They are illustrative, not advice.
Buy a tired terrace for £130,000, spend £22,000 on the refurbishment and about £7,500 in purchase costs, so roughly £159,500 goes in. After the works it revalues at £185,000. Refinancing at 75% loan-to-value pulls out £138,750, leaving about £20,750 of your own money in the deal. It rents for £950 a month.
Recycling most of your capital into the next project is the whole point of BRRR, and the reason the deal only works if the post-refurbishment valuation and the refinance both land. The analyser shows exactly how much you leave in.
Buy a four-bed house for £210,000 and convert it to a five-bed HMO for £28,000, plus about £9,000 in costs, so roughly £247,000 in. Let the five rooms at £560 a month each and you have £2,800 a month gross, a gross yield of about 13.6%, far above a single let.
HMOs cost more to run: bills, licensing, higher management and higher voids. Set those allowances in the analyser so the headline gross does not flatter the deal, and the net still lands well ahead of a standard buy-to-let.
No purchase. You agree a three-year lease with a landlord at £1,400 a month, with written permission to sublet, and around £4,000 to furnish and make it compliant. You operate it as a four-room HMO at £2,650 a month gross. After the rent to the owner, bills and management of about £650, you keep roughly £600 a month.
Rent-to-rent needs little capital, but the margins are thin and it is management-heavy, so it only holds while occupancy stays high. Run it through the analyser and you can see how quickly a couple of empty rooms erase the profit.
Change any figure and the analyser updates instantly. When a deal stacks up and you buy it, PROXERA then tracks whether it keeps performing every month. For single lets you can also use the rental yield calculator and the buy-to-let calculator.
Worked examples use illustrative UK figures and are not investment, tax or mortgage advice. Your own numbers, lending terms and local market will differ. Speak to a qualified adviser before acting.
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An HMO earns rent from each room, but in most HMOs the landlord pays the bills. That is why a gross yield that looks strong can leave much less once utilities, council tax, broadband, cleaning, management and maintenance come off. The calculator takes your rooms, rent per room and expected occupancy, subtracts every running cost and the mortgage, and shows what is left each month before personal tax.
In England, a property let to five or more people forming two or more households who share facilities needs a mandatory HMO licence, and some councils license smaller HMOs too. Some areas also require planning permission to convert a family home into an HMO. Check with the council before you buy; our guide to Liverpool’s HMO rules shows how quickly local rules can change.
For a full worked example, read how to calculate HMO cash flow after bills and costs, or start with our guide for HMO investors.
Gross yield is the total annual rent from all rooms divided by the purchase price. Net yield subtracts the annual running costs, including bills, before dividing. In an HMO the gap between the two is usually wider than in a single let because the landlord pays the bills.
Usually gas, electricity, water and broadband, and in England council tax, because rooms are let individually. Cleaning of shared areas, insurance, maintenance and licence costs are also landlord costs.
Base it on local evidence and your own experience. Each empty room loses its rent while the bills carry on, so the calculator lets you set an occupancy rate and a void allowance separately.
In England a mandatory licence applies to properties let to five or more people from two or more households who share facilities. Many councils also run additional licensing for smaller HMOs, so always check with the local council.
No. Cash flow here is before personal tax. Tax on rental profit is worked out differently, for example mortgage interest is not deducted in the same way for individual landlords.
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Information, not advice. The calculator gives illustrative figures based on what you enter. It is not a personal recommendation and does not constitute financial, investment, mortgage, tax or legal advice.
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The bills, running costs and tests to check before you trust an HMO cash flow figure.
