Guide
HMO rental cover: gross, net and the stress rate
Updated
Rental cover on an HMO is the number everyone quotes and few people compute the same way. The lender's version and yours measure different things, and both are worth having.
What the lender tests
Normally gross rent against the payment at a stressed interest rate rather than the rate you will actually pay. The stress exists because a facility written today may reprice, and Bank Rate has moved recently: 4.25% in May 2025, 4.00% in August, then 3.75% from 18 December 2025.
Ask what stress rate is applied and whether cover is tested on gross or net rent. Those two answers between them decide how much you can borrow, and neither appears on a rate sheet.
What you should test
Net rent, after a void allowance and after running costs. On an HMO the bills are usually inside the rent, which is the defining economic difference from a single let and the thing that makes a gross yield misleading.
The calculator on this page works downwards from rent per room precisely so the running cost line has to be filled in. A model that omits it makes every HMO look better than it is.
Voids behave differently
A single let is either occupied or empty. An HMO is partly occupied almost all the time, so voids show up as a steady percentage rather than as occasional gaps, and they cluster in the least desirable rooms.
Model the void allowance at the room level. If one room in six is empty on average, that is a 16% void, and it is a far more realistic starting point than the two weeks a year a single-let spreadsheet assumes.
Management is a real cost
HMOs are more management-intensive than single lets: more tenants, more turnover, more compliance, more wear. Whether you self-manage or pay an agent, that is a cost and it belongs in the running cost figure.
If you self-manage, put a number on your own time anyway. It makes the comparison with a single let honest, and it tells you what an agent is actually worth when you eventually want one.