Blog Post 5 - HMO Margins Are Shrinking - Landlords Are Being Forced to Think Creatively

“The measure of intelligence is the ability to change.” —

— Albert Einstein

HMO Margins Are Shrinking – Landlords Are Being Forced to Think Creatively

The UK’s HMO landscape is changing faster than ever.

Landlords who were once operating with comfortable margins now face a very different reality — one built around soaring insurance premiums, stubbornly high mortgage rates, and relentless energy costs.

For many, the numbers simply don’t stack like they used to.

💢The Pressure Points Every HMO Landlord Feels

1. Insurance Costs Have Skyrocketed

Specialist HMO insurance has jumped anywhere from 20% to 60% over the last two years.
Higher rebuild costs, more claims, and tighter underwriting mean landlords are paying significantly more for the same level of cover.

2. Mortgage Rates Are Still High

Even with occasional rate drops, most landlords coming off 2% deals are now facing 5–7% mortgages.
For HMOs with leveraged finance, that’s a massive hit to monthly cash flow.

Many landlords now find themselves breaking even — or even dipping negative — during certain months simply because interest costs crush the old profit margins.

3. High Energy Prices Add Even More Pressure

Although energy prices have stabilised, they’re still nowhere near pre-2021 levels.
And because most HMOs include bills, landlords continue absorbing:

• Higher standing charges

• Higher unit rates

• Unpredictable tenant usage
  

The combination makes forecasting harder and cashflow tighter.

💡Why Creative Solutions Are Becoming Essential

With margins compressing from all sides, landlords are now seeking smarter, more flexible management solutions to protect their income. Traditional letting agents don’t always work for HMOs — they’re usually too rigid, too expensive, or just not tailored to the realities of multi-let properties.

This is where two modern models have been gaining traction:

1. Guaranteed Rent

A growing number of landlords prefer to remove risk entirely.
They want stability, not surprises.

A guaranteed rent arrangement provides:

• A fixed monthly income

• No voids

• No tenant management

• No stress about bills or maintenance coordination

• A predictable year-round cashflow
  

In a volatile financial environment, predictability is extremely attractive.

2. Bespoke HMO Management Packages

Not every landlord wants a “full takeover.”
Some prefer a hybrid approach.

This is where bespoke management comes in — the landlord chooses exactly what responsibilities they want to keep, and what they want to outsource.

It allows them to:

• Reduce costs

• Keep control where they want it

• Offload the stressful or time-sensitive elements

• Structure the management model around their strengths
  

This approach is quickly becoming the new standard in HMO management.

🏚️ A Real Example: 7 HMOs, One Smart Package, Thousands Saved

Recently, we onboarded seven HMOs for a landlord who didn’t want traditional management — and didn’t want a hands-off guaranteed rent agreement either.

He wanted:

• To handle tenant communication

• To manage maintenance

• To stay involved in day-to-day decisions
  

But he also wanted us to take over the tasks that required expertise, time, or legal precision:

• Annual safety certifications

• Deposit management

• Tenant sourcing

• Setting up new tenancies
  

So we crafted a fully bespoke package.

Not only did it remove the operational headache for him, but it also saved him thousands every single month compared to traditional management fees — while increasing the quality and compliance of his HMOs.

This hybrid model gave him the best of both worlds:
Control where he wanted it. Support where it mattered most.

🚀 The HMO Market Is Changing — But Landlords Can Still Win

These financial pressures aren’t disappearing anytime soon.

But the landlords who adapt — and use smarter, more flexible management approaches — will continue thriving. At the end of the day, most landlords are in HMO market for long term gains!

Whether it’s:

• Removing risk with guaranteed rent

• Reducing workload with a bespoke management package

• Or restructuring responsibilities to maximise profit
  

There are always solutions available when you understand the numbers and build a plan that fits your property, not someone else’s template.

If you're interested to explore what options might be suitable for your own properties, contact your local management suppliers and see if they are flexible on solutions they provide. Good Luck!