Houses of multiple occupation (HMO) tend to be popular with young professionals and students. And the city of Liverpool just so happens to have more than 60,000 students as well as a growing population of younger professionals*. Therefore, you might think it’s ripe for HMO investment.
But is Liverpool a strong city for HMO? In this guide, we explore the potential advantages and drawbacks of purchasing a HMO in Liverpool to help you decide if it could be a worthwhile investment.
Housing market trends in Liverpool
Liverpool’s housing market has been one of the strongest performers in recent years compared to other major cities in the UK. Average house prices in the city increased by over 60% between 2014-2024, outpacing national growth by 20% over the same period.
Liverpool average property price increase over 10 years
Description | 2014 (£) | 2024 (£) | Increase (£) | Percentage Increase (%) |
Average Price | 73,717 | 60.28 |
UK average property price increase over 10 years
Description | 2014 (£) | 2024 (£) | Increase (£) | Percentage Increase (%) |
Average Price | 75,900 | 40.37 |
Despite this, property prices in Liverpool still remain relatively affordable, with an average house costing around £196,000. This has likely made the city an attractive option for some investors looking for higher potential returns through buy-to-let opportunities.
Liverpool’s ongoing regeneration efforts, such as the five billion Liverpool Waters development, have further bolstered the city’s housing prospects. Economic growth and improving amenities continue to draw new residents and fuel housing demand in the city centre and surrounding areas.
Rental demand for HMOs
A primary factor driving interest in HMO property investment in Liverpool has been the city’s large student population. With over 60,000 students across multiple universities, the consistent need for affordable rental housing near campuses potentially provides a ready market for HMO landlords.
But student tenants aren’t the only source of rental demand. Liverpool also has a sizable population of young professionals who may also look for cheaper accommodation in the form of HMO compared to a single let. Rents have also been trending upwards, with average room rents of around £550 per month not being uncommon for professional HMO tenants.
What else makes Liverpool an attractive city for HMO investment?
Liverpool’s growing appeal as an investment destination for HMOs lies not just in its housing market fundamentals, but also the city’s amenities, cultural attractions and development activity. These factors help drive tenant demand from students and young professionals.
Liverpool is home to several world-renowned museums and galleries that give the city a distinctly vibrant cultural atmosphere. These include the Museum of Liverpool, Tate Liverpool, Merseyside Maritime Museum and The Beatles Story museum. The city’s iconic waterfront along the River Mersey is also a major draw, featuring the famous Three Graces buildings and Albert Dock.
As home to Liverpool FC and Everton FC, two hugely supported Premier League clubs, the city is a mecca for football fans across the UK and beyond. On matchdays, Anfield and Goodison Park stadiums draw tens of thousands of fans, providing an economic boost to local businesses and underscoring Liverpool’s global sporting profile.
Liverpool has an incredibly lively nightlife and live music scene, centred around districts like the Georgian Quarter, Baltic Triangle and Ropewalks area. The legendary Cavern Club, which launched The Beatles, remains a figurehead alongside countless other bars, restaurants and clubs.
Multi-billion pound regeneration initiatives like Liverpool Waters and the Littlewoods building conversion into a film and TV campus are transforming swaths of the city and have attracted investment interest. Liverpool’s selection as the UNESCO City of Music in 2015 has further certified its cultural cachet.
Liverpool is home to the University of Liverpool, Liverpool John Moores University and Liverpool Hope University among others. These institutions attract thousands of students annually and funnel graduates into the local workforce across industries like healthcare, finance and technology.
With its unique heritage, world-class attractions, sporting passion, nightlife, and urban revitalisation, Liverpool has transformed into one of the UK’s most compelling cities for investing and lifestyle alike. These amenities have likely had an impact in creating demand in the HMO rental market.
HMO yields in Liverpool
HMO rental properties in the UK can generate attractive returns for investors compared to standard buy-to-let offerings. Indeed, some data has the average yield as high as 8.1% for HMOs compared to 4.4% for single occupancy.
The north east, north west and Yorkshire and the Humber offer some of the most attractive yields, especially when compared to the likes of London, where property prices are much higher. Liverpool, which is located in the north west, typically presents high-than-average yields.
The average depends on the area and demand, but post codes such as L4 offer single-occupancy yields of 7.8%. Considering HMO yields tend to be higher, it’s not unrealistic to expect strong yields in the city.
HMO legislation and licensing
It’s important for prospective HMO investors in Liverpool to understand the legal requirements involved. Mandatory HMO licensing is required for any rental properties with five or more tenants comprising two or more households.
Licensing criteria includes guaranteeing that properties have adequate amenities, fire safety provisions and adhering to minimum room size standards. The application process also involves property inspections from the local council.
Licensing process can be complex, but obtaining a HMO licence is central to operating this type of rental property legally and avoiding facing significant fines and legal issues down the road.
Potential risks of HMO investing
As with any investment, purchasing a HMO property does carry potential risks that need to be considered:
- Possible higher mortgage rates and lender requirements for HMO properties
- Increased costs for maintaining and furnishing the property
- Dealing with higher tenant turnover and periods of no rental income
- Potential issues with anti-social tenant behaviour
- Changes to HMO laws and licensing that could impact profitability
Whether you decide to manage the HMO yourself or employ a professional company, having a strong property management strategy in place plays a role in dealing with challenges like tenant disputes, repairs and filling vacancies quickly.
Getting an HMO mortgage
Most mainstream lenders don’t offer standard buy-to-let mortgages for HMO properties. Specialist HMO mortgage products are required as an alternative, and you often need to find a buy-to-let-focused lender to get a HMO mortgage.
When applying for a HMO mortgage, lenders will typically want to see evidence that anticipated rental income covers mortgage costs by at least 125-130%. Having prior experience as a landlord and a sizable personal income can also improve the chances of approval.
At Molo, we offer HMO mortgage products for investors. To qualify, you’ll need:
- At least 12 months’ experience as a residential BTL landlord
- AHMO property with no more than 12 lettable rooms
- A property that’s rented out by three or more people who aren’t related and from more than one household
We will require a physical valuation for up to six lettable rooms to decide the suitability of the property. A red-book valuation is required for properties with seven to 12 lettable rooms.
Find out more about Molo’s HMO mortgage products
Final thoughts: HMOs in Liverpool
While the HMO market in Liverpool offers enticing potential returns driven by strong rental demand, this remains a hands-on investment that requires careful due diligence, research into location dynamics and professional advice to navigate licensing requirements and mitigate risks. With the right preparation, HMOs may provide an attractive income stream for investors in Liverpool’s housing market.
*Demand for HMOs in Liverpool
https://www.masonverdi.com/blogs/liverpool-is-fastest-growing-city/
https://www.thecompleteuniversityguide.co.uk/student-advice/where-to-study/universities-in-liverpool
