HMO, Buy-to-Let, Airbnb: Maximize Returns

Buy to Let Introduction:

Investing in buy to let, HMO and AirBnB properties can take various forms, each with its unique financial considerations. Understanding the nuances of financing Buy-To-Let (BTL) properties, House in Multiple Occupation (HMOs), and Airbnb ventures is crucial for individuals looking to venture into the property market.


Buy-To-Let (BTL) Financing:

Definition and Purpose:

Buy to let mortgages is a mortgage that you buy for investment purposes and that you rent out to tenants and is not a property for you to live in.

Mortgage Options:

Buy-To-Let mortgages are factored on value of property, as well as rental that you will get on that property. We will need your personal criteria and credit file, to ensure we find a lender most suitable for your requirements. Rental is worked out the following way: there are several types of borrowers; personal, limited company/SPV (Special Purchase Vehicle). If you are buying via an LLP, as a personal borrower you are put into two categories; lower rate taxpayer and higher rate taxpayer, and therefore you’re stressed depending which category you you’re in.

As a lower rate taxpayer, a rule of thumb is that you will be stressed at 125% of pay rate, and as a higher rate taxpayer you will be stressed, and although this varies lender to lender, anywhere between 145 percent to 175%. Because of pay rates, this means that if the mortgage is costing, for example £500,000 the rent would either have to be 125% or anywhere between 145 and 175% all that will amount to pass the stress tests so if your rent was only £500 and your mortgage was £500 that would fail the stress test you would need, as an example to be comfortable £800 or more as an example.

However, if you buy your buy-to-let within an SPV, as a limited company even if you are a higher rate taxpayer you will be stressed at the lower rate because you would only be liable for limited company taxation. Therefore, many people these days are buying buy to lets as a limited company (a few are going down the LLP route due to capital advantage capital allowance advantages). However, this is really niche and not suitable for everyone as it’s quite sophisticated and a lot of lenders don’t like it. You should always get expert advice from the accountant when looking at LLP and limited company SPV.

Rental Income and Costs:

Although you may see a rental income return as quite high,  remember that this is a gross figure and you wil have deductions such as property maintenance , letting agent fees, EPC Report, annual gas boiler, emergency repairs as well as potential tax. So, you need to understand the real figure which will be the net figure at the end.

Risk Mitigation:

You need to be prepared for tenancy voids or the potential where you may have a good tenant turn into a bad tenant and not receive rent and have to evict the said tenant. You may have a tenant have a life changing event and need your temporary support, what this means is that you should really have 6 months rent as a backup on account in cash so you have the fiscal ability to tackle these problems head on.


House in Multiple Occupation (HMO) Financing:

Understanding HMOs:

HMO will typically yield better than your typical BTL Property and stands for house of multiple occupation. Because you have several people renting in one property, you will, have a greater yield that your traditional Buy-To-Let.

Specific Mortgage Requirements:

HMO have different licenses, not only do you have to have an HMO license on the property, but you yourself will need to be licensed. Just because you’re looking at an existing HMO to purchase, does not automatically guarantee it can be an HMO under your ownership. You will also have, as part of the licensing conditions stricter terms and conditions of the running procedures and safety required for this property.




Managing Multiple Tenancies:

You may find running multiple properties and a full time job can be overwhelming or having properties in different locations across the country, it therefore could well be good business planning to have full management of your properties done by external professionals.

Return on Investment:

The bigger the HMO or investment property, the greater the risk due to collection of multiple rents costs and time required to manage the said property investment.

Airbnb Finance:

Airbnb as a Rental Model:

This is exploded in the last few years and is a continued growth due to the larger yields this is able to provide. It is becoming extremely popular with people who are looking for luxury flat overnight accommodation with all the trimmings and ability to self-cater or room only against using hotels or Bed and Breakfast.

Mortgage Considerations:

AirBnB/Short-Term Holiday Lets is more of a niche market and as such, you have a more limited number of lenders to choose from and these lenders may be charging a higher interest rate, an arrangement fee for the privilege of a holiday let mortgage.

Income Potential and Risks:

You have substantially greater outlay on your property as typically it is a luxury, fully furnished property and more items are subject to wear and tear as well as damage. It is not a guaranteed contract or income and could be subject to seasonal fluctuations.


Legal and Regulatory Considerations:

To operate AirBnB, you may be faced with extra licensing, insurance and  future licensing as currently being discussed in parliament and to potentially limit and license AirBnB Holiday lets similarly to HMO.

Risk Management and Professional Advice:

It is important to get specialist advice before entering any niche property purchase and you should make sure to speak to not only a specialist mortgage adviser but also an accountant, letting agent and estate agent and really do you research on the local area, market trends, historic valuations and use such tools to assist you such as Air DNA as one example.

Risk Mitigation would be all about making sure you have a financial cushion and if you have more than one property, focussing on diversification along with working with management professionals.



Investing in BTL, HMOs, or Airbnb properties can be lucrative, but it requires a deep understanding of financing options, risks, and compliance. Each investment type comes with its unique financial considerations and regulatory obligations. Prospective investors must conduct thorough research, seek professional guidance, and understand the local market dynamics to make informed investment decisions in the property market.