HMOs (Houses in Multiple Occupation) and MUFBs (Multi-Unit Freehold Blocks) generate higher rental yields than standard single lets, often between 8% and 14%. But they come with additional licensing requirements, stricter lending criteria, and a smaller pool of willing mortgage providers.\n\nWhat Counts as an HMO — Under the Housing Act 2004, a property is an HMO if three or more tenants from two or more separate households share facilities like a bathroom or kitchen. Mandatory licensing applies to HMOs with five or more tenants. Many local authorities have introduced additional licensing that catches smaller HMOs too, so always check with your council.\n\nLending Criteria Differences — Standard BTL mortgages typically lend up to 75% LTV on a straightforward single let. HMO mortgages may cap at 70% LTV and require evidence of an HMO licence (or confirmation that one is not needed). Lenders assess rental income per room rather than a single tenancy, and stress testing may be stricter.\n\nLenders Who Specialise — The Mortgage Works (Nationwide's BTL arm) accepts licensed HMOs up to 6 bedrooms. Paragon is one of the most experienced HMO lenders in the UK, accepting larger HMOs and portfolio applications. Kent Reliance, Aldermore, Fleet Mortgages, and West One all have HMO products with varying criteria.\n\nMulti-Unit Freehold Blocks — A MUFB is a single building containing multiple self-contained flats, all owned under one freehold title. These are assessed differently from HMOs because each unit is self-contained. Paragon, Shawbrook, and some specialist lenders provide MUFB finance.\n\nArticle 4 Directions — Some councils have introduced Article 4 Directions that remove permitted development rights for converting houses into HMOs. If an Article 4 Direction applies, you need full planning permission to operate as an HMO. Check before buying, because obtaining retrospective planning permission is not guaranteed and refusal leaves you with an unlettable property.