The Cost of Converting a Property to an HMO
Converting a property into a House in Multiple Occupation (HMO) can be a lucrative strategy, but it’s also one of the most capital-intensive and complex processes an investor will face. From initial strip-out to final handover, a refurbishment project demands detailed budgeting, careful scheduling, and close oversight of trades and compliance. Setting a Realistic Budget Many HMO investors underestimate the true cost of converting a single let into an HMO. It’s not just the building work to consider, there are professional fees, compliance costs, and ongoing operational requirements to account for. A typical budget should cover: Cost to Convert a Residential Property to an HMO For a small 4–6 bedroom HMO conversion, investors should expect: With contingency added, many projects land in the £70,000–£140,000 range. Having this level of breakdown allows you to track progress against budget and calculate your expected ROI more accurately. Detailed breakdown of HMO conversion costs 1. Acquisition & Professional Fees (£7,000–£15,000) The first import costs to consider are the acquisition and professional fees involved in an HMO conversion. The cost of these can vary greatly and can be influenced by a number of factors, including where the property is located, the size of the property and the condition that it’s in. Here is a bit more detail on what those costs are: Tip: A thorough survey and legal due diligence can help identify potential HMO compliance issues early, saving thousands in future remedial work. 2. Design, Planning & Professional Services (£5,000–£10,000) Another key part of your HMO conversion costs is the professionals you may need to hire as part of your conversion process. Getting your conversion right is a key part of making your HMO marketable and sustainable, so working with professionals like architects, structural engineers and HMO design consultants can be an inevitable part of the process. This includes: Tip: Engaging professionals familiar with HMO regulations can prevent costly rework or compliance failures. 3. Licensing & Compliance Applications (£1,000–£3,000) Compliance is one of the key parts to consider when it comes to an HMO conversion. There are various fees associated with obtaining things like licenses, fire risk assessments and other compliance certificates. This includes: Tip: Budget both the licence fee and the cost of bringing the property up to the council’s required standard. 4. Construction & Refurbishment (£40,000–£80,000) The largest part of any HMO conversion project is going to be the actual construction and refurbishment work itself. We’ve estimated this can be between £40,000 – £80,000, but realistically the cost here can be as low or as high as is necessary for your build. Of course, a few small modifications to an existing HMO vs converting a large property into a large HMO can be completely different prices. Working with professionals early on can help you get a better grip on what the realistic construction costs might be for your specific project. Tip: Get multiple contractor quotes and include a clear scope of works to avoid price creep during the build phase. 5. Fire Safety & Compliance Systems (£10,000–£20,000) Fire safety systems are an important part of any HMO, and should be considered in your budget. The fire safety requirement for HMOs are far more stringent compared to general buy to let properties, and requirements like fire alarm systems, fire doors, lighting systems and more are common. Tip: Always have a qualified fire safety consultant design and sign off on your fire safety system. 6. Furnishing, Decoration & Fit-Out (£8,000–£15,000) Tip: High-quality HMO interior design and durable furniture pays off through reduced replacement costs and better tenant retention. 7. Contingency & Miscellaneous (10–15% of total) It’s always worth have a contingency budget in case of issues or delays. We recommend having at least 10-15% of the total for contingency in case of the following: Large Sui Generis HMO Conversion Costs For larger HMOs (7+ bedrooms), development costs increase significantly due to extensions, additional bathrooms, fire and acoustic requirements, and more extensive internal and external works. This cost framework helps investors plan large-scale Sui Generis projects, estimate potential ROI, and ensure financing aligns with expected development expenditure. Managing the HMO Conversion Process Project management is about turning that budget into a functioning, compliant HMO within the agreed timeline. Success starts with defining the scope clearly: how many rooms will the property have, will en-suites be added, are extensions or loft conversions planned? This scope guides both your planning application and your tender process with contractors. Selecting the right team is equally critical. At a minimum, you will be working with a main contractor and various trades, but many investors choose to appoint specialist HMO designers who can produce drawings, manage planning submissions and oversee compliance. For more complex projects, a dedicated project manager may be worth the investment, taking day-to-day oversight off your shoulders. Once the team is in place, a detailed schedule of works is essential. Breaking the project into phases, demolition, structural work, first fix, second fix, compliance installs, decoration and furnishing, provides accountability and helps prevent delays. Regular site visits, weekly cost reviews and close attention to compliance at each stage reduce the risk of expensive remedial works later. To summarise: Avoiding Common HMO Conversion Pitfalls Even well-prepared investors can fall into traps during an HMO refurbishment, and these mistakes often cost both time and money. One of the biggest pitfalls is underestimating HMO conversion costs. It’s easy to focus on the building works and forget about professional fees, licensing charges or the expense of fire safety systems, which can quickly add tens of thousands to the budget. A lack of contingency is another common issue. Unexpected structural problems or planning conditions can derail even the most carefully considered plan if you haven’t set aside extra funds. Another frequent mistake is choosing contractors based on the cheapest quote rather than experience. HMOs have very specific compliance requirements, and tradespeople unfamiliar with fire doors, alarm systems or amenity standards may complete work that later has to be redone. This often results in