Investment Dilemma – HMO or Home Extension?

[Jag40]

Hi everyone,
I’d love to get your thoughts on a property investment decision I’m trying to make. I have two options to invest £50K
1️⃣ Invest in an HMO (House in Multiple Occupation) – Purchase a property, rent it out as an HMO, and generate rental income. This could provide a steady cash flow, but I’m still researching demand and long-term viability.
2️⃣ Extend my existing home – Use the funds to build an extension instead. This could increase my property’s value and equity over time, but there’s no immediate return like rental income.
I’m weighing up the risks and benefits of both. Has anyone done either of these? What factors should I consider before making a decision? Any advice would be much appreciated!

I wouldn't do either if you want to invest. Put it in a stocks and shares ISA and leave it there. £50k won't buy you much and being a landlord is expensive. £50k also won't get you a very big extension these days and any added value will depend on the market when you sell.

Would extending your home make your use of house better? I wouldn't extend just to try and add value if not, as you might not get your money back.

Agree with previous poster that Isa investments are a good idea. You can do £20k now and another 20 from April 6th, as the allowance is per tax year.

I pity the tenants of a landlord that has £50k to spend, and wants to set themselves up with an HMO.

I am a landlord - a very experienced one at that.
I wouldn’t be investing in a HMO. I would buy a property - a doer upper and renovate it to a high standard and rent it out as a single let.

Everyone thinks that owning a HMO that your pockets are lined with cash but they’re not.

I know many landlords who own HMOs - who would earn exactly the same from a rental as they would from a HMO… with a HMO, you are responsible for paying council tax and utility bills. You also have to register the property and have a licence. You also have to comply with other regulations too. It is costly. You’re also taking another property away from an already deprived housing market.

Buy a property that has potential, renovate it, let it out to a decent tenant on a long term basis and you should have no issues.

It’s what I’ve done for the last 25 years and I had a portfolio of properties that I have sold off over the recent years (still have some) and it will enable us to have a very very comfortable retirement.

You could extend your house but you wouldn’t get much back as you would with a BTL. Investing in stocks is another good recommendation.

That was very helpful, thank you. I will look into this strategy.

Our city used to be awash with hmos but the council have stopped issuing licenses and the universities have their own accommodations now. Landlords are selling HMOs or a share of them at an alarming rate.

I doubt £50k would even buy somewhere to make into a hmo?

You won't make money doing with of those things unless you are looking at very long term investments. I would invest in a share portfolio.