Why Landlords Should NOT Switch from HMO to BTL in 2025
As UK property regulations tighten, many landlords with Houses in Multiple Occupation (HMOs) are contemplating switching to Buy-to-Let (BTL), believing it will be easier to manage. However, this shift can significantly reduce rental yields, increase financial risk, and limit flexibility.
Before making the move, landlords should consider these 11 compelling, evidence-based reasons why sticking with HMOs is the better long-term strategy in 2025.
1. HMOs Generate Higher Rental Yields Than BTL
One of the most significant advantages of an HMO is its higher rental income potential. Unlike BTL, where you receive rent from just one tenant or household, an HMO allows you to rent rooms individually, maximizing income.
The average UK HMO yield is 10.4%, with the North East reaching 15.4% compared to BTL yields of just 4-6%.
In the North West and Midlands, where demand is strong, HMO rental growth is up 7.9% year-on-year.
📌 Source: Lendlord HMO Data Analysis
While BTL properties rely on one tenant paying a fixed monthly rent, an HMO can generate 2-3 times that income, even after factoring in higher running costs.
2. Rising Demand for Affordable Shared Housing
The fastest-growing rental market in 2025 is not families renting whole homes, but single professionals, key workers, and skilled migrants looking for affordable, flexible housing.
Professional migrants (such as NHS staff and hospitality workers) are a key tenant group, often seeking rooms in HMOs rather than whole properties.
SpareRoom's 2024 report shows room rents in the North West up 5% year-on-year, reflecting increased demand for shared housing.
📌 Source: SpareRoom Rental Index
Unlike BTL tenants, who often need long-term security, HMO tenants value flexibility, leading to higher demand and reduced void periods.
3. Easier Tenant Turnover & Evictions in HMOs
With an HMO, tenant turnover is natural, as most renters are young professionals or transient workers. In contrast, evicting tenants from a BTL property can be far more difficult, especially when children are involved.
The Renters’ Reform Bill (2025) removes Section 21 'no-fault' evictions, meaning BTL landlords will struggle to remove tenants even if they stop paying rent.
HMOs with Assured Shorthold Tenancies (ASTs) allow for faster repossession on a room-by-room basis, reducing the financial impact of difficult tenants.
📌 Source: UK Government Renters’ Reform Bill
This makes HMOs a safer bet in an era where tenant protections are increasing.
4. HMOs Have More Tax Benefits Than BTL
Taxation has become a major issue for BTL landlords, especially those owning properties in their personal name due to Section 24 mortgage interest relief restrictions.
HMO landlords can claim more expenses, including:
✔ Utility bills (often included in rent)
✔ Council tax (if paid by the landlord)
✔ Furniture and white goods (capital allowances)
✔ Cleaning & maintenance costs
Many HMO landlords operate under a limited company, benefiting from corporation tax at 19% instead of personal income tax at up to 45%.
📌 Source: UK Property Tax Guide
In contrast, BTL landlords with single-tenancy properties are more exposed to income tax, making profits significantly lower.
5. More Flexibility to Adjust Rents
Unlike BTL properties, where landlords typically fix rents for long-term tenancies, HMOs provide greater flexibility to adjust prices with market trends.
When tenants leave, HMO landlords can increase rents for new occupants, keeping income aligned with inflation and demand.
Room-by-room pricing means landlords don’t have to wait for entire tenancy agreements to end before adjusting rates.
This means HMO landlords always stay ahead of the market, while BTL landlords risk falling behind inflation due to long-term rental agreements.
6. Shorter Void Periods in HMOs vs. BTL
A vacant BTL property earns nothing, but an HMO continues generating income even when some rooms are empty.
Average void periods (2024):
HMOs in Midlands/North West: 3-4 weeks
BTL properties: 6-8 weeks
📌 Source: HomeLet Rental Index
Void periods hit BTL landlords harder because the entire income stops, whereas HMOs minimize risk by spreading rental income across multiple tenants.
7. The Renters’ Reform Bill Makes BTL Harder
The abolition of Section 21 evictions is a major blow for BTL landlords, who will have fewer options to remove problematic tenants.
Indefinite tenancies will make it harder to regain possession for landlords needing to sell or repurpose properties.
HMOs, however, can still remove tenants more efficiently, as they are typically on shorter AST agreements.
📌 Source: UK Parliament Renters' Reform Bill
8. Higher Interest Rates Mean BTL Requires Higher Rents
Current mortgage rates (2025):
2-year fixed: 4.87%
5-year fixed: 4.69%
📌 Source: Rightmove UK Mortgage Rates
As mortgage costs rise, BTL landlords must raise rents just to break even, which could price tenants out. HMOs spread mortgage costs across multiple tenancies, reducing the financial burden.
9. HMOs Appreciate in Value Just Like BTL
Many landlords believe BTL properties offer better capital growth, but this is not always the case.
Well-located HMOs in strong rental markets appreciate similarly to BTL homes.
Example: A 6-bed HMO in Birmingham purchased in 2020 for £280,000 is now valued at £375,000 (34% increase).
📌 Source: Property Data Reports
10. Professional HMO Management Reduces Workload
HMOs require active management, but landlords can outsource this to HMO management specialists, allowing for passive income without the stress.
11. More Frequent Property Inspections & Control
HMO landlords can inspect communal areas without notice, helping to spot maintenance issues early.
BTL landlords cannot enter a property without permission, meaning:
A home could be trashed for months before discovery.
Repairs can cost thousands in neglected damage.
Conclusion: HMOs Remain the Smarter Choice in 2025
Despite added regulations, HMOs remain the superior investment, offering:
✔ Higher rental yields & lower void risks✔ More flexibility with rent adjustments✔ Better property control & easier evictions
Thinking about improving your HMO strategy? Contact us today! 🚀
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