So, you’re interested in investing in HMO property but want to know more about how to find the right areas to invest in? Given the complicated nature of HMO investment, from Article 4 considerations, licensing and planning permission to name a few, making sure you’re picking a property that will be profitable and manageable is an essential part of any successful investment strategy. Therefore, picking the right area for your investment is crucial.
In this article, we’re going to talk a little bit more about how to find the right area to invest in and key considerations when conducting your research, as well as provide some data on the best areas in the UK based on rental yield potentials.
Understanding your ideal tenants
Thinking about the best areas for HMO investment starts at understanding your ideal tenants. If you understand the types of people who will be looking for HMOs in the UK, you can better understand the areas they may gravitate towards and, therefore, where the highest demand is for HMO, leading you to better HMO investment decisions.
Some of the benefits of living in an HMO for people can include:
- Affordability compared to living alone
- Social side of house sharing
- Convenient location for commuting / getting to amenities
- No need to purchase furniture
- Short and flexible contracts
With this in mind, while HMOs can attract many different people from all walks of life, there are a few key demographics that tend to find HMO living more appealing, including:
- Students who are on a tight budget and studying locally
- Young working professionals at the start of their careers looking to save money
- Migrant workers looking for affordable housing while settling into the country
This gives you an idea of the people that you may want to market your HMO property to and, therefore, where some areas might be in the country that these types of people generally want to live.
What makes a good HMO investment area?
High demand for rented housing
Understanding where there is higher demand for shared housing can help you better understand areas where HMO investment might be a good idea. For example, look out for places where there are lots of young working professionals or a high student population. This can make tenant turnover a lot easier to manage when demand is high and filling rooms is easier.
Higher population areas generally increase the demand for shared housing, particularly in areas where there is a shortage of affordable housing options. However, you should always do your own research to confirm this.
In 2025, rent has continued to outpace wage growth, with rents climbing 40% and wages climbing 28%. Affordable housing continues to be in high demand, and so lower cost accommodation such as HMOs is likely to fill some of this demand.
Our goal is to help you achieve the best possible return on you HMO investment.
Transports links & amenities
In general, if you are marketing your HMO to students or young professionals, proximity to cities and amenities can be a key part of your HMO investment strategy. One of the benefits of HMOs for tenants is that commuting around the city is easy, helping them save money on getting around vs having to use a car or take a longer train journey. Cities with good transportation links (trains, buses, etc.) are more attractive to tenants, especially commuters.
Younger people tend to be more interested in nightlife and employment opportunities, so this can make city centre locations even more appealing. Proximity to amenities such as supermarkets, gyms, restaurants, and entertainment hubs is attractive to tenants.
Places such as Bristol or Leeds may fulfil this criteria well.
Universities & student areas
Cities in the country with universities can be a worthwhile consideration for HMO investment opportunities. Given that students are one of the key demographics when it comes to HMO demand, looking to invest in areas where there are universities means that there will generally be a high demand for student housing, with a reliable tenant turnover.
Therefore, we recommend considering university areas when looking at HMO investment areas. Places such as Leeds have three universities, and Manchester has two.
Property prices in the area
Cities with very high average sold prices don’t always translate to a good return on investment. According to research by SDL property auctions, areas such as Brighton, Oxford and Cambridge may have lower potential rental yields despite their high student population due to the higher house prices.
When thinking about areas for HMO investment, consider the average price of properties in the area, as cities with relatively affordable property prices but high rental demand provide better entry points for investors, leading to higher returns on investment. You can also consider regeneration areas, such as locations undergoing regeneration often present opportunities to purchase properties at lower prices with potential for future capital growth.
Some examples might include places like Hull, Coventry and Nottingham.
Rental yield potential
HMOs typically generate higher rental yields than traditional Buy-to-Let properties. When investing in cities in the UK, look out for areas where the average HMO yields are at least 7-10% when conducting research.
Many tenants seeking accommodation such as HMOs will weigh up the cost of renting a whole place vs renting a single room in an HMO, and given the overall lower cost of HMOs, they often command a premium due to their affordability for tenants compared to renting an entire property. This helps you achieve higher rental yields.
Areas in Wales and Yorkshire & Humber offer good general rental yield opportunities of between 8-9%, based on recent data.
Article 4 Considerations for HMO Investment
If you are looking to invest in HMOs, you should be aware of Article 4. Article 4 is particularly common in cities in the UK where the demand for housing is high and housing affordability is challenging. Therefore, the number of HMOs that the local councils permit is limited by Article 4 directions.
Article 4 is essentially a restriction implemented by local councils that removed permitted development rights, meaning that converting a C3 property (residential) to C4 or Sui Generis (HMO) requires a full planning application. As a landlord or property investor, understanding Article 4 and its restrictions is crucial, as it can determine whether an investment area is a wise idea or not.
Take a look at our guide on Article 4 areas in the UK to see where. You can also try out HMO Checker, a comprehensive property analysis tool that will tell you if your elected property falls in an Article 4 area, plus a whole host of other useful information. Try it out for free.
Best Regions for Highest HMO Rental Returns in the UK
The average rental income per region in the UK for HMOs varies widely depending on factors such as demand, property value, and the number of tenants. Below is an overview of average rental incomes for HMOs by region, based on available data:
| Region | Average Property Value (£) | Average Annual Rental Income (£) | Average Yield (%) |
| Wales | 322,000 | 29,100 | 9.01 |
| Yorkshire & Humber | 308,000 | 26,600 | 8.61 |
| North West | 324,000 | 27,000 | 8.33 |
| East Anglia | 344,000 | 28,400 | 8.26 |
| East Midlands | 325,000 | 26,400 | 8.12 |
| Scotland | 309,000 | 24,400 | 7.91 |
| West Midlands | 355,000 | 27,100 | 7.63 |
| North | 381,000 | 28,000 | 7.58 |
| South West | 478,000 | 35,800 | 7.48 |
| South East | 503,000 | 36,100 | 7.18 |
| London | 863,000 | 52,900 | 6.13 |
Source: Paragon Bank
While city-specific data isn’t detailed in this dataset, the regional figures offer a general perspective on HMO rental potentials. For instance, Cardiff, located in Wales, benefits from the region’s high average yield of 9.01%. Similarly, cities like Manchester and Birmingham, situated in the North West and West Midlands respectively, reflect their regional averages of 8.33% and 7.63%.
For more specifics on the best cities for HMO investment in the UK for 2025, check out our recent guide on HMO Checker.
Any other tips on HMO investment areas?
A good HMO investment property city combines high rental demand, affordable property prices, strong rental yields, economic growth, and favorable regulatory conditions. Researching each of these factors will help you identify locations that align with your investment goals.
If you’re looking for more support or guidance on your HMO investment journey, why not reach out to our team? We are a small team of industry professionals here to guide you through the often complicated HMO process.
We have lived in HMOs, designed hundreds of them, and we actively invest in them ourselves. This experience has allowed us to build invaluable industry knowledge, which enables us to help our clients achieve their own HMO property goals.
