HMOs in 2026: What Happens Next And How to Take Advantage

As we step into 2026, there’s no shortage of opinions about what the property market is going to do next. Some people are calling for a boom, others are predicting a crash. 

So in today’s episode, I’m laying out how I genuinely think 2026 will play out for HMO investors based on the data, the conversations I’m having across the market, and my own experience of building and operating HMOs at scale.

This episode is about clarity. It’s about cutting through the extremes and understanding why a steady market is often the best environment to build a serious HMO business. I talk about what’s likely to happen with rents, house prices, tenant behaviour, lending, regulation, and why execution, margins, and systems will matter more than ever this year.

I also explain where I think opportunities will start to emerge as tired and overextended landlords begin to exit and what you need in place if you want to be in a position to take advantage of that.

🎯 What You’ll Learn

• My predictions for rent growth, occupancy, and house prices
• How tenant behaviour is changing and why voids are the real risk this year
• The practical impact of regulation and reporting on HMO operators
• What lenders will be focusing on and how to stay finance-ready
• Why good operators will be quietly rewarded and poor execution will be punished

If you’re building, scaling, or systemising an HMO portfolio and want a clear, grounded view of what actually matters in 2026, this episode will help you go into the year prepared, focused, and confident.

And if you want my direct input on your business this year, you can book a complimentary strategy call with me here.

💻 Resources & Mentions

• The HMO Roadmap: Feeling overwhelmed? Access 400+ tools, templates, and lessons to help you start, scale, and systemise your HMO business - all in one place. Join here.
• Facebook Community: Got questions or need support? Come and connect with 10,000+ investors inside The HMO Community here.
• Social: Follow me on Instagram for daily HMO tips, advice, and behind-the-scenes updates here.

Transcript

Andy Graham (00:02.67)

Hey, I'm Andy and you're listening to the HMO Podcast. Over 10 years ago, I set myself the challenge of building my own property portfolio. And what began as a short-term investment plan soon became a long-term commitment to change the way young people live together. I've now built several successful businesses. I've raised millions of pounds of investment and I've managed thousands of tenants. Join me and some very special guests to discover the tips, tricks and hacks, the ups and the downs, the best practice and everything else you need to know to start, scale and systemise your very own HMO portfolio now.

Andy Graham (00:40.654)

Today I am going to lay out how I think 2026 will look for HMO investors. I'm going to give you my predictions on rents, on house prices, on tenants, on lending, on regulation and everything else that I think should be shaping your decisions this year. If you're building a HMO property business then this is an essential episode to kick off the new year with. Let's get into it.

Hey guys, it's Andy here and we're going to be getting back to the podcast in just a moment. But before we do, I want to tell you very quickly about the HMO roadmap. Now, if you're serious about replacing your income, or perhaps you've already got a HMO portfolio that you want to scale up, then the HMO roadmap really is your one-stop shop. Inside the roadmap, you'll find a full 60 lesson course delivered by me, teaching you how to find more deals, how to fund more deals and raise private finance, how to refurbish great properties, how to fill them with great tenants that stay for longer, and how to manage your properties and tenants for the future.

We've also got guest workshops added every single month. We've got new videos added every single week about all sorts of topics. We've got downloadable resources, cheat sheets and swipe files to help you. We've got case studies from guests and community members who are doing incredible projects that you can learn from. And we've also built an application just for you that allows you to appraise and evaluate your deals, stack them side by side and track the key metrics that are most important to you. To find out more, head to theHMOroadmap.co.uk now and come and join our incredible community of HMO property investors.

Andy Graham (02:13.864)

Welcome back gang now look I get it there's never a shortage of opinions at this time of the year but today I'm gonna give you mine anyway for what it's worth now I've been looking at the data listening to the views across the market and thinking about what all this actually means but more specifically so for the HMO property market and off the back of that I formed some ideas some conclusions about how I think 2026 is likely to play out so in today's episode I'm gonna walk you through my predictions what I think happens when it comes to rents to house prices to tenant behavior to lending to regulation

And how I think all of that should be shaping your approach for the year ahead if you're investing in HMOs. Now to look ahead, I think it's important to first of all look backwards. Let's talk about 2025 for a minute and only a minute because I don't want to talk about it for much longer than that. But if you look back at the year just gone, rents were pretty soft across the board. Not everywhere, but certainly enough so that people took notice of it. Occupancy was also a little bit softer, certainly softer than the two or three years previous to that. 

Now again, not across the board, but certainly in some areas. Now at the same time, a lot of investors last year didn't really do very much. A lot of people just waited, they sat on their hands, didn't they? That wasn't necessarily because the market had fallen away. It was more so because of the uncertainty. The budget was a big part of that. It introduced lots of question marks. Whenever that uncertainty creeps in, that decision making process slows down. People pause. People want to wait to see what happens.

Of course, interest rates stayed quite high, certainly higher than most people had hoped we would kind of end at the end of the year. So deals didn't necessarily look much better. And I think that surprised a lot of people. Yes, inflation cool, but prices have still kept rising. It hasn't necessarily meant that costs have come down. So things on the spreadsheet aren't and haven't necessarily been looking any better. And of course, alongside all of that, the renter's reform bill made its way into law. That shifted the conversation from this might happen or what might this look like to, actually, this is actually part of the landscape now. 

So 2025 was quite a dramatic year for the property market and certainly for us as HMO investors. And it was uncomfortable and it caused a lot of people to reconsider. And that's the backdrop that I think we're moving into 2026 with. Now look, my headline view for 2026, and this is where I want to start today. My headline view, when I look across the market, I think

Andy Graham (04:36.6)

The word that I keep coming back to is steady. And when I say steady, I mean good. Steady markets are predictable. Predictable markets are much easier to operate in. And they tend to reward people who are well organized, certainly those who are disciplined and those who actually run their portfolios like businesses. And that is definitely the way it has to be done now. If we've seen anything over the last few years, it is the relentless commitment from the government to make landlording a profession they want to squeeze the little landlord out and they want to give this stuff to the big Corporation. So if you want to do it, you've got to be prepared to think more like a corporation.

I don't see the ingredients for a boom this year at all But I certainly don't see the ingredients for a crash now if anything happens elsewhere in the world and there's a lot of tension right now. All bets are off. So that is a big caveat of today's episode. Hopefully that is not the case, but looking a bit more at the sort of micro markets in the UK. I don't see anything that's overly concerning or anything to get overly excited about, but that is a good thing. I don't think rates are going to spike. I don't think inflation is necessarily going to run away or come down to the sort of 2% quickly, but supply hasn't suddenly improved either. And while regulation is going to be more demanding when to talk about this today, I think the direction of travel is actually quite clear in 2026. 

So rather than the extremes that we've been of experiencing over the last couple of years, what I see is a fairly settled investment environment. And to explain why that matters, let me start by talking about rents. Now, my prediction for rents in 2026 is that we're going to see growth in the region of about 4% across the board. Now that doesn't mean that every property sees that and it definitely doesn't mean that every room sees that. But what I mean is that the good stuff will continue to be good. It'll still work. If you've got good rooms in the right locations, priced sensibly and managed properly, they're going to perform really well. 

I think where it gets harder is where rooms have been priced a bit too toppy, a little bit more expensive than the market can cater for that they're in rooms that were potentially fine a few years ago where that demand was a little bit stronger, but haven't necessarily kept up. Maybe some more stock has come to the market. Maybe those properties have lost their shine a little bit. That could be a challenge. And I think because people have squeezed the spreadsheet over the last couple of years,

Andy Graham (07:03.886)

those rooms that have had to be priced a little bit higher that have just about worked over the last couple of years, they might struggle a little bit and they're certainly not going to see that same amount of growth. The focus should definitely be on occupancy and not rental appreciation. But I'm going to talk a little bit more about occupancy soon. I think it's also worth saying that because the renter's reform bill coming in, the way that landlords and agents approach increases in rent is likely to change and that could influence what we see on the market. 

For example, in areas like London, it was very commonplace for something to go on the market at a particular price. Tenants would typically bid it up if it was in demand and the landlord might well take the best price that they could get. Now that's not something I ever did morally and ethically. It wasn't something I ever agreed with anyway, but the markets that I operate in don't really operate like that. However, for big number of landlords across the country that was the case and that's not going to be able to happen anymore. So what does that mean? Well, it might mean that agents and landlords in areas where they do have a large demand, they might price rents very high because they know that it's not going to go any higher than that. And if they don't or aren't able to achieve it, they can just chip it down and reduce that rent. I think also because there are more restrictions in terms of rental increases that might change the way that things come onto the market and how things are priced. 

So I guess we'll wait and see exactly what that looks like, but there's definitely going to be a little bit of settling when it comes to that stuff as well. But look, I think rents across the board, like I said, 4%, I think some places, not all places. And I think it's much more important this year to focus on occupancy than it is rental appreciation. And here's why, because I think tenant behavior is changing. I think it has changed. I expect through 26 that people are going to continue to deliberate a little bit more when they're making that decision about moving house, about taking a room. The cost of living pressure certainly hasn't gone away. In fact, I think we're really only just feeling the bite in the last 12 months and I think that's going to continue for a while. I think employment is feeling a little bit cautious, certainly in some sectors. We've also got AI looming and the changes that that could actually materially bring about in 2026.

Andy Graham (09:33.07)

We saw a little bit of the impact of that in 2025, but not anything that was kind of reported on. But I think we might see a bit more of that. A lot of our tenants are young people that can be replaced by AI in certain fields. So let's wait and see. But I think people aren't moving unless there's a really obvious reason to do so. Tenants are looking more closely. They're taking longer to decide. And if something is broadly accepted, they're just more likely to stay put. And that's why I think occupancy pressure is going to be so critical this year. And I think, especially in those areas with a weaker demand, I think that that's going to be really, really important. And I think it's why service is going to be so important as well. 

In this kind of market, it's more important than ever to be service focused. If you've got good tenants, you don't want to give them any excuse to leave whatsoever. Your responsiveness, your communication, how you handle issues, all of that is going to matter far more than it did a few years ago because it's going to be harder to fill your rooms and that is going to be a very expensive problem, far more expensive than not pushing your rents up 4%. A room empty for a month on average in a year has a massive impact on your top and bottom line. Whereas whether or not your rent appreciates one, two, three or 4% or even depreciates a little bit doesn't have anywhere near the same effect and impact. 

But I'll be honest, a lot of landlords and investors driven by their ego will disregard just how significant voids are because they're chasing the highest rents possible. They feel like not getting those top top rents that they perhaps put on the spreadsheet is failure. And in fact, it's going to be far more expensive to have a room empty for any period of time whatsoever. So just don't give your tenants any reason to leave. 

Okay. Now let's sprinkle on some of the realities of operating HMOs, the margins and the costs, things like that. Operating costs haven't fallen at all. In fact, utilities, maintenance, staffing, compliance, all of this stuff is expensive. It's more expensive than it was this time last year. Yes, inflation is cool, but prices haven't gone backwards. So what does this mean? Well, in a fast moving market, inefficiencies can hide, but we're not in a fast moving market. We're in a steady market and it's very difficult to hide from these sorts of inefficiencies. If you're overpaying for things, if you're spending too long,

Andy Graham (11:59.182)

and that's coming at a cost to do certain things, then that is going to be very, very obvious. So even with rent potentially rising a little bit, your margin is going to become the real battleground. It's not about squeezing every last pound out of every room in 2026. It's actually about knowing your numbers and protecting your net income. This is about your P&L. What are you actually spending your money on? Where are your efficiencies? Where are your inefficiencies and what can you do about them? And look, honestly,

Good operators are going to be quietly rewarded in this steady market. Those who are not paying attention are going to find it very, very difficult. And I can tell you right now, I'm going to come onto lending, but banks are going to be looking at this sort of stuff. If you want to refinance a property in 2026, the banks may well ask for the OPEX, the operational expenditure, and they are to pay attention to what you are actually making on your properties. 

So, keep all of this stuff in mind, but look, at the end of the day, if you want to be making more from your property business, then this is what is really important in 2026. Now, let's talk about the biggie, prices, values. Now, on property prices, I am, generally speaking, expecting to see low single digit growth. Very boring, I know, but roughly around 3% across the board. And think if we finished there, that would be pretty good.

There are lots of things impacting this and I'm not going to go into today's episode. We could do a full episode on this, but things like affordability limits, how fast prices can rise. There are still supply constraints. There are no incentives out there in the market, the cost of living, the same employment pressures, all sorts of things are limiting affordability and price and property values. But for HMO investors, this isn't the main story. 

In fact, house prices are actually a bit of background noise, if I'm honest, in our market. HMOs tend to succeed or fail based on their income and their occupancy and their execution and their profitability, not small movements in valuation. So do I think that we're likely to see undervalued assets hitting the market, distressed stock? Yes, possibly for a few different reasons. I'm going to come onto that shortly. Do I think that we are going to be inundated with exceptionally good opportunities?

Andy Graham (14:21.134)

No, but certainly more than the last couple of years. Yes. But the other side, when it comes to valuations, do I think that we are going to get the punches valuations that we can possibly put on the spreadsheet? Probably not. I think still a caution would be a sensible idea in 2026. I think putting good deals together, focusing on good deals, good environments, good products that'll last the time horizon that you should be planning for 10, 15 years of good performance before you really have to go back in and make any material changes to the property. I think that's the sort of stuff you should be focusing on buying this year, not necessarily things that just look like really, really good prices. Yes, that's a nice, pretty bonus, but I don't think that that is going to be what we remember 2026 for. So yeah, look, that's me sticking my neck out 3% in growth across the year. 

Let's talk a bit about regulation and admin. Another defining feature of 2026 is definitely going to be that the legislation that has been circling around us for years now is no longer theoretical. It's being implemented. The renters reform bill, that framework, that act, sorry, that's just going to add more pressure when it comes to processing, to admin. That'll cost money. Making tax digital, that's coming in this year. That is going to mean that we've got to do more reporting as landlords. None of this suddenly makes HMOs viable, but it does require more effort than it used to. That's the short and simple version of that. 

Now for landlords who already operate professionally, don't think that matters too much. If you've already got things in place like Xero or Sage for your accounting, then making tax digital is not a great leap to be quite honest. If you've already got your head around the renter's rights act and what all of that stuff means, you're ahead of the curve and it's probably not going to impact you too much. But if you're not aware of any of this stuff,

If it's not in your head space, then it is going to be a problem. It's going to be expensive. It's going to be hard work. It's going to be frustrating. And I think that that sort of fatigue, that sort of frustration, that will change behavior. Now, who am I talking about specifically? Well, there are a lot of landlords of a particular age who own a lot of property in their own name, as opposed to through company and limited structures. I think some of the changes that wash through this year,

Andy Graham (16:46.146)

will absolutely be the last straw, the straw that breaks the camel's back. I think that there is going to be a bit of a changing of the guard this year. I think it's going to start this year. I think that that looks like more stock coming to the market. I don't think it looks like distressed stock because these landlords don't necessarily need to sell. I think they want to sell. But interestingly, I think that they will be landlords. I think a lot of the stock that comes to the market that looks good and interesting is existing stock. And if you're operating in an area where there's an article four direction, I think this is quite exciting because typically speaking good markets where there is an article four direction, there isn't a huge amount of movement in terms of stock being transferred. I think we're going to see more of that this year. And I think that if you can make it make sense on the spreadsheet, I'd be really, really, really suggesting you look closely for those sorts of opportunities.

A lot of these landlords own a lot of stock as well. They will have capital gains tax bills to consider, which is a biggie and they might be advised to phase their exits rather than just sell everything this year. They might do it systematically over a number of years, but I think making tax digital and the rental reform bill an act coming through, think that that will change the opinion of some landlords and whether or not this is worth doing it anymore. If, and because you're here today, I assume is the case, you are prepared to do the work, run your business professionally, get your head around all this stuff, you'll be just fine. It'll be a bit of work to get it all set up and to get into the rhythm. But I think if you're operating like a professional landlord, you'll be just fine. And I think there was some really good stock coming to the market to take advantage of and to buy. But like I said, not necessarily distressed stock, a really discounted stock, which would be nice. 

By the way, I do think there'll be a bit of that. I think that there will be some landlords, some developers, some business owners that have overextended over the last couple of years. And I think that the challenges that the economy has thrown at them may well prove to be a little bit too great this year. And actually there may well be some repossession. So it'd be interesting to keep an eye on some of that stock, but I don't think that that is the story of 2026. 

Let's talk about lending on the lending side. Then I expect a much greater appetite for lenders on the HMO side of things. Why? Well, HMOs

Andy Graham (19:11.286)

If we're honest, they are pretty much the strongest rental asset class at the minute. It's a steady environment for lenders because of the predictable income. If you're buying the right stuff in the right location and it's all demonstrable, but at the same time, lending is going to be more forensic. I think there's going to be more due diligence, more scrutiny, more focus on the operator, on the management and the costs and the quality of the asset and tenants. And I think that that means that more finance will become available, but it will be a bit more selective. And if you're not careful, you could end up paying a bit more than you expect because you haven't quite got some of the ingredients right to suit some of the more favorable lending products out there and lenders in the market. 

So I think that's probably quite a good summary of my thoughts on the HMO property market for 2026. But before I wrap this up, I thought I'd share a few other opinions from some of the experts so that you've got some wider context. 

Now, Rightmove is currently forecasting around 2% on house price growth in 2026. Savils has also trimmed their outlook. I think they're looking about, or proposing about 2% growth this year. Savils have sort of been jumping around a little bit over the last couple of years. Nationwide, a bit broader, talking about something like 2 to 4% growth. I'm kind of sitting in the middle of that. Halifax, slightly more cautious, 1 to 3%.

Zoopla, interestingly, at the slightly lower end of that range around 1.5 ish percent growth in values on house prices across the year. On rents, few people have put out their precise numbers for 2026 yet, but I think from a general viewpoint, most groups think that rents will continue to rise, but at a moderate pace, probably for all of the same reasons that I've just outlined today. So that kind of lines up, I suppose, with about four or maybe even five percent, but I think five percent would be pretty, pretty good if rents got there this year. I'm not confident that they'll get that far. 

But look, when you look across all of those views, the common theme, the narrative seems to be modest, steady growth, no big swings either way. And actually I think that is great. I would love that this year. I hope we finish the year just like that, because that's a great environment to plan and to be able to predict and to feel confident in.

Andy Graham (21:32.802)

So look, let's bring it all together. When I step back and take a look at 2026 as a whole, this is how I see it. I think it's a steady year. I think that's a great thing. I think it's more demanding operationally, but I think if you know how to put your systems and your processes and your operating system in place, you'll be just fine. I think it quietly moves assets from some of the weaker hands and some of the tired hands to the stronger hands and the more ambitious hands and to hands that are just

They're kind of prepared to put the work in now that they aren't looking to put their feet up. Tired landlords, yeah, they're going to start exiting. And not because HMOs don't work, but just because their efforts don't really feel like it's worth it anymore. They've won. They've made so much money in property over the last 10, 20, 30, 40 years that they don't really need to spend their time going back through their portfolios, reinvesting, learning all of this stuff. They're going to be quite happy to let people like us do it. 

Good HMOs, well-run HMOs will continue to perform. Good operators are going to be rewarded. And I think that that is the big, big, big, big, big takeaway. So don't worry too much about whether it's 3 % 4 % this year. I would suggest you focus on being really, really, really good at what you do. So for me, the takeaway is simple. It's a year to be clear headed, to really understand your numbers, your ROI, your return on capital employed, your gross net ratios, your debt service coverage ratio, all of that jazz. You need to know your OPEX.

You've got to be able to protect your margin and you need to be really selective about where and how you grow. You need to make sure you've got the operating system in your business. Otherwise you will be inefficient and that will be a very, very expensive problem. And while I don't think that this year looks the greatest in terms of being able to force value through assets and force value back through refinancing, I think it's still going to feel a little bit stingy.

I do think that this is going to be a great year to get the buy-in from investors and from banks who do want to put money into the market, who have got that slightly longer term approach. So if you know how to raise and utilize capital, structure deals creatively, put joint venture agreements together, if you can raise money consistently and you've got a plan, then I think you'll do really, really well. Combine that, finance with a good deal infrastructure, the ability to surface deals, to get offers in.

Andy Graham (23:54.99)

to negotiate from a position of leverage to make sure that you've got a good pipeline stacked. If you can combine that with your finance and then put that operating system in place to make all of that happen on autopilot, then this could be, 2026 could be a really, really, really fantastic year. I genuinely mean this. I am excited about 2026 and I haven't been excited for a few years about property. It has felt like, and it has looked like a bit of a grind, but I think that 2026 starts to look exciting again. 

And if you're prepared to the work in, I think you are going to get really, really, really well rewarded for what you do this year. But at the same time, 2026 will punish poor execution. And I mean that and there's going to be no hiding from that whatsoever. So if you're set up properly, treat this like a business, stay disciplined. And I think this will be a really solid year. 

Now, if you want my help this year in your business to accelerate your results, to find more deals, raise more capital, to build the operating structure, to make it all happen on autopilot, to sense check your deals, to reduce your risks, to do more, to get more out of it all, then just head to the show notes. Now there's a link there that'll link you to a video. And if you watch that video, you can find out what working with me looks like. You can also book yourself a complimentary strategy call. 

So if you want to talk about your business and how I might be able to help, just follow that link there and get yourself a call booked. That is it for today's episode guys. Thank you for tuning in and don't forget that of course I'll be right back here in the very same place next week. So please join me then for another installment of the HMO Podcast.