5 Top Cities for HMO Investment in the UK (Updated 2026)

What makes a good HMO investment area in 2026?

If you are interested in investing in HMOs, understanding what makes a good HMO investment area can be key to making the right investment decision. 

When selecting the ideal city for investing in HMOs in the UK, it’s good to understand the current property market trends and identify areas with strong potential for growth. Several key factors can influence property investment success:

Capital growth

Areas with significant capital growth are particularly attractive for property investors. Look out for cities that offer affordable property prices and robust rental yields. This makes them prime candidates for HMO investments. Additionally, cities with ongoing regeneration projects or infrastructure improvements can make lucrative areas.

Rental demand

When looking for good HMO investment cities, look out for areas with high rental demand as well as lower housing supply. This makes ideal HMO investment areas. Cities with large student populations with universities, thriving job markets, or a high population of migrants can have strong rental demand. 

Property prices

Looking at the affordability of properties in the cities you are researching can be crucial for maximising your return on investment. This can be particularly important when looking for HMO conversion properties, as the conversion costs will have to be factored into the offer property price. 

What Factors are Impacting HMO Investment Areas in 2026?

The 2026 HMO landscape is defined by the full implementation of the Renters’ Rights Act, the HS2 Phase 1 launch, and stricter EPC (Energy Performance Certificate) targets.

The Renters Rights Act 2025 has ended fixed-term tenancies and have been replaced by rolling periodic tenancies. This is a huge shift for student HMOs in Leeds and Liverpool, as tenants can now give two months’ notice at any time. Investors must now budget for higher turnover and potential mid-year voids.

In addition, while the government scrapped the 2025 deadline, the new 2030 target for all rental properties to hit EPC Band C is now the primary focus for 10-year investment plans. In 2026, savvy investors are prioritizing properties that already meet this standard or have clear upgrade paths.

And, for the first time, HMOs are now subject to the same Decent Homes Standard as social housing. This means stricter enforcement on damp, mould, and insulation, making cheap conversions a high-risk strategy.

5 Best Cities for HMO Investment in the UK

While there are many areas in the UK that are lucrative for HMO investment, we’ve picked some of the top areas that have seen HMO success in the UK and provided some key facts and figures on why that is. 

1. Leeds

Leeds is home to the largest banking and finance sector. It is also home to major universities like the University of Leeds, Leeds Beckett University, and Leeds Trinity University. The influx of students each year creates steady demand for shared accommodation, which is ideal for HMO investors.  The city has a booming professional and tech sector, with large firms in industries like finance, digital, and legal services. This has created demand for affordable shared housing options for young professionals.

The private rental sector is the second largest behind home ownership, and it has a consistent demand for long-term lets. HMOs in Leeds command an average yield of 8% – 15%, with average house prices around £249,000, cementing it as a key investment city. However, Leeds does enforce Article 4 Directions in certain areas, so it’s worthwhile checking whether your property falls within this area, or opting for an existing HMO property in these areas vs purchasing a property to convert. 

Key HMO Investment Areas in Leeds

• Headingley: This is well known as a popular student area as it is close to the University of Leeds and it is well connected, meaning there is a healthy student demand for shared living in this area. Given the Article 4 directions in place, it can be a good idea to look for existing HMOs in the area vs conversion properties. 
• Hyde Park: Another popular student area with high tenant demand, Hyde Park is home to Brudenell Social Club, a music venue with live bands and cheap drinks. As above, Article 4 directions are a consideration. 
• City Centre: The city center is always in high demand and appeals to more professional tenants. 
• Burley: Popular with both students and young professionals, Burley offers quieter, affordable options for accommodation making it a good investment area.

If you are looking to invest in HMOs in Leeds, it’s a good idea to read the council’s “How we decide on planning permission for HMOs” guide.

2. Manchester

Investing in HMOs in Manchester presents a great opportunity due to the city’s thriving rental market, largely driven by a substantial student population and a growing influx of young professionals in the city. Manchester’s population has grown to approximately 635,000 in 2026. With a shortfall of nearly 15,000 student beds, the demand for HMOs in the “inner ring” (Salford and Cheetham Hill) has driven yields to record highs.

Manchester HMOs boast an average rental yield between 8% and 10%, much higher than many standard rental properties, with property prices averaging £255,000. This is attributed to the city’s expanding population and the continuous efforts to refurbish and improve areas like Ancoats and Salford. This enhances property values and rental income potential.

Recent data indicates that certain areas within Greater Manchester offer varying gross yields for HMOs. For example:

• Salford: Approximately 13% gross yield, considering both pre and post-refurbishment costs.
• Central Manchester: Around 13% gross yield, factoring in refurbishment expenses.
• Bolton: Approximately 14% gross yield, inclusive of refurbishment costs.

In terms of market demand, Manchester’s tenant base, including students from the University of Manchester and Manchester Metropolitan University, as well as young professionals, are drawn to the city’s economic opportunities. This helps to sustain the high demand for HMO accommodation. There is an Article 4 direction in place for the whole of Manchester.

It’s also worth noting that Manchester City Council has intensified enforcement in 2026. Proving “Lawful Use” is now more critical than ever.

Key HMO Investment Areas in Manchester

• Salford: Close to MediaCityUK which attracts young professionals from media and tech industries. There is ongoing regeneration and great transport links which ensures steady tenant demand. However, Salford is also in an Article 4 area. 
• Ashton-under-Lyne: Properties here are relatively affordable with strong tenant demand given the transport connections to Manchester. This appeals to both students and professionals. 
• Bury: Located in the suburbs, Bury provides an easy commute which attracts professionals and families. Affordable property prices offer stable returns.
• Failsworth: This is a budget-friendly alternative to central Manchester which appeals to young professionals and students who are seeking affordability, offering you potentially strong rental returns. 
• Bolton: This is a cost-effective entry point for HMO investors, given the potentially high yields and strong demand. It’s popular among professionals and families. 
• Rusholme: Very close to the University of Manchester as well as major hospitals. It attracts students and medical professionals, though investment could require properties with existing planning permission due to Article 4 restrictions in place.

Confidence Property also pulled together the following data which is particularly useful for Manchester HMO investment: 

Area	Average Monthly Room Rent (Q3 2024)	Average Sold Price(3-bed terrace)	Gross Yield(Excluding Refurb Cost)	Gross Yield(Including Refurb Cost)
Wigan	£553	£120,407	28%	15%
Oldham	£604	£135,714	27%	15%
Rochdale	£590	£136,986	26%	15%
Bolton	£561	£138,699	24%	14%
Bury	£584	£160,901	22%	13%
Salford	£699	£211,621	20%	13%
Manchester	£707	£221,474	19%	13%
Stockport	£643	£221,351	17%	12%
Cheadle	£680	£276,291	15%	11%
Sale	£647	£328,552	12%	9%

3. Birmingham

With HS2 Phase 1 (London to Birmingham) officially opening in late 2026, the “commutable” professional HMO market has exploded. Investing in HMOs in Birmingham provides a great opportunity given the dynamic rental market in the city and the large student and young professional population. Birmingham’s rental yields for HMOs do vary by area, with some regions offering higher returns. 

While there is less data available for specific regions in Birmingham, the average HMO rental yield sits at around 7.63% in the West Midlands region, with much of this being driven by data from Birmingham. Property values average around £241,000.

Birmingham’s tenant base includes many students and young professionals which sustains high market demand for HMO. Plus, their status as a major educational and economic hub contributes to its robust rental market.

Key HMO Investment Areas in Birmingham

• Selly Oak: The prime location for University of Birmingham and Birmingham City University, Selly Oak attracts a large student population which helps ensure a consistent demand for HMOs. However, due to the Article 4 directions in place, it could be better to look for existing HMOs to invest in vs conversion properties.
• Edgbaston and Erdington. These are great locations for HMOs in Birmingham. These areas are popular due to their proximity to the city center and the prevalence of Victorian-style houses, often with two reception rooms and usable attics, which make them suitable for HMO conversion.
• ‍Digbeth: This area around the new HS2 terminal is no longer just “up-and-coming”; it is now a prime hub for high-end co-living style HMOs catering to London-linked professionals.
• Solihull: This area has an abundance of amenities, transport connections and career opportunities, as well as the benefit of such close proximity to Birmingham, which makes it a good investment option. In addition, it’s very close to the airport, which can be useful for working professionals that frequently air travel.  

Birmingham does enforce Article 4 Directions in certain areas, so it’s worthwhile checking whether your property falls within this area. Opting for an existing HMO property in these areas vs purchasing a property to convert is another avenue if this is the case. 

4. Liverpool

HMO investment in Liverpool is a growing opportunity given the city has more than 60,000 students as well as a growing population of younger professionals. The city is home to three universities, including Liverpool Hope University, the University of Liverpool and Liverpool John Moores University, with their iconic buildings becoming a huge part of the city’s landscape. 

The consistent need for affordable rental housing near universities provides a ready market for HMO landlords. The growing economy also attracts young professionals seeking affordable shared housing options, further bolstering the HMO market. 

HMOs in Liverpool can achieve average yields of approximately 8.1%, compared to 4.4% for single occupancy rentals. Despite huge growth in property prices in Liverpool in the last 10 years, housing still remains relatively affordable with average house prices at £189,000. However, Liverpool also implements Article 4 directions in certain areas and, therefore, any conversions in these areas will require planning permission. 

Key HMO Investment Areas in Liverpool

• Wavertree: This area in Liverpool is close to the universities, in the middle of various university campuses, with good transport links. The affordable property prices with high demand for shared housing make it a great HMO investment location. In addition, the bus services run a student only service along these routes due to the large population of students living here.
• Kensington: This area, closer to the city centre, is also popular amongst students. It’s geographically close to the main University of Liverpool and there are plenty of successful HMOs here. 

5. Cardiff

Cardiff, the capital city of Wales, is home to major universities, including Cardiff University, Cardiff Metropolitan University, and the University of South Wales, and also has a growing professional workforce as well as affordable property prices compared to other areas.  The blend of affordable house prices with a large pool of potential tenants makes it an extremely attractive destination for HMO investors of all budgets.

2026 is a renewal year for thousands of Rent Smart Wales licenses. This has led to a flurry of compliance-heavy HMOs hitting the market as older landlords exit, creating a buying opportunity for professional investors who can handle the paperwork.

House prices in Cardiff on average are £273,000, and according to a report by Paragon Bank, HMOs in Wales generate an average yield of 9.01%, which is the highest across Britain. 

Unlike other councils in the UK, planning permission is required for all HMOs whether housing 3-6 or 7+ unrelated people by Cardiff Council (C4 & Sui Generis). However, Article 4 directions are not in place as they are in some other major cities in the UK, such as Manchester and London. 

Key HMO Investment Areas in Cardiff

• Cathays: This area is a central student hub with strong demand for shared accommodation. This residential neighbourhood is close to Cardiff University and the university’s Sherman Theatre shows drama and comedy, and the Student Union hosts regular concerts. 
• Roath: This area of Cardiff offers diverse housing stock, from Victorian terraces to modern apartments, making it a great investment area from HMO property. It is popular with students and young professionals and is close to Cardiff University and city amenities.

Other Top HMO Investment Cities in the UK 

Here are some other top HMO investment areas in the UK for 2026: 

• Edinburgh – A city with a diverse economy, a booming tourism industry, and affordable property prices. Edinburgh also has six universities and over 55,000 students, with full-time students comprising over 12% of Edinburgh’s population.
• Stoke-on-Trent – A city offering easy access to big cities like Liverpool, Manchester, Birmingham, Derby, and Nottingham. Stoke has two universities and a student population of around 25,000, and is one of the most affordable cities for buying property in.
• Bristol – A hugely popular city with young people, Bristol is a vibrant and trendy city with two world-class universities. It has a highly skilled workforce and excellent employment opportunities for graduates and young professionals.
• Newcastle – The largest metropolitan city in the North East with large economic transformation and billions of pounds invested into regenerating the area and increasing employment opportunities.

In 2026, the best HMO investment is no longer just about the highest number of rooms. It’s about quality and compliance. With the removal of ‘no-fault’ evictions (Section 21), your best defense against arrears or problematic tenants is providing a high-quality home that attracts high-quality occupants. Focus on ‘En-suite’ heavy conversions and high EPC ratings to future-proof your portfolio.