Planning + licensing + amenity + fire-safety differences
Small HMO (Class C4, 3–6 unrelated): (1) Planning — PD via GPDO Class L outside Article 4; full application inside Article 4 (16+ boroughs). (2) Licensing — mandatory if 5+ occupants; additional if 3–4 in borough additional licensing area. (3) Amenity — HMO Standards 2018: bedrooms 6.51m² single / 10.22m² double; kitchen 5m² + 1 cooker per 5 occupants; 1 bathroom per 5. (4) Fire safety — Grade D LD2 interlinked mains-wired alarm; FD30 bedroom/risk-room doors; protected escape (30-min compartmentation); risk-based FRA. (5) Building Regs — minor works only if no extension; Part B + Part L on extensions. (6) Yield — 6.5–8.5% gross; £750–£1,200/month per room. (7) Management — owner-manage feasible or letting agent £85–£140/week. Large HMO (sui generis, 7+): (1) Planning — full always + likely committee + Section 106 (£8k–£25k per bedspace) + CIL on extensions; pre-app £540–£1,200. (2) Licensing — mandatory + on-site or 24/7 manager. (3) Amenity — same room sizes, tighter ratios (2nd kitchen 8+ occupants; 1 bath per 4; lounge 11m² + 1.5m²/occupant). (4) Fire safety — Grade A LD1 (control panel + detection + manual call points throughout); FD30S bedrooms + FD60S escape 3+ storey; sprinkler retrofit typical BS 9251; fire engineer report £4,500–£12,500; emergency lighting; protected stair. (5) BR — full Part B + Part E acoustic + Part F. (6) Yield — 8–11% gross; £900–£1,400/month per room (premium ensuite); £68k–£117k/year on 7–9 bed. (7) Management — professional ARLA/Propertymark agent £140–£260/week.
Cost + ROI comparison + which to choose + Builderr approach
Small HMO conversion 4–6 bed Victorian terrace London 2026: acquisition £550,000–£950,000; conversion £45,000–£85,000; total £595k–£1.035M. Gross rent 6 × £950 = £68,400/year. Net 5.4–9.4% gross / 4.5–8% net. Refinance to 70–75% LTV typical 18 months on. Large HMO conversion 7–9 bed semi/end-terrace: acquisition £750,000–£1.45M; conversion £125,000–£245,000 (rewire + fire engineer + sprinkler + 3 bathrooms + 2 kitchens + protected escape + Grade A alarm + Section 106 + furniture); total £875k–£1.69M. Gross 8 × £1,150 = £110,400/year. Net 6.4–9.8% gross / 5–7.6% net. Refinance at 65–70% LTV (lenders cautious on sui generis). Decision drivers: (1) capital available — large HMO £150k+ extra; (2) borough — Article 4 + saturation push against new large HMO; (3) property — semi/end-terrace 5+ original bedrooms suits large HMO, 4-bed terrace suits small; (4) time horizon — large higher yield but harder exit (sui generis hits buyer pool); small retains C3 reversibility; (5) risk appetite — large higher management + tenancy turnover + ASB; (6) tax — Section 24 hits both; limited company (SPV) often preferred for large HMO portfolios (Corp Tax 25% vs Income Tax 40–45%, but rates 1–1.5% higher). Builderr default: small HMO for 1st-time HMO landlord; large HMO for experienced portfolio with letting agent + £250k+ working capital. Pre-app + saturation analysis before commit. See [[buy-to-let-renovation-budget-london]] + [[converting-house-to-hmo-london-planning]] + [[hmo-fire-safety-compliance-london]].
