High-end HMOs are all the rage, and for good reason. Ensuite to every room, cinema room, co-working space, the lot. Done well, they attract professional tenants, keep them for longer and build a brand that fills rooms.

But in my weekly conversations with investors, the piece that gets least airtime is risk.

Sometimes building high-end is the right call. But it isn't a better HMO by default. It's a different risk profile, and plenty of investors don't price that in. Here's what to weigh up before you decide on the spec.

Refurb cost

Ensuites are where most of the extra spend goes, and the cost is more than the bathroom suite.

• Plumbing and drainage. Upper-floor ensuites can need new soil stacks or pumped waste units, which can mean structural and external work.

• Hot water. Eight showers running at 7am is a very different demand from three shared bathrooms. That can mean a bigger boiler or cylinder.

• Ventilation, fire safety and building control. Every ensuite needs extraction, and more rooms with more services means a bigger compliance job.

Bigger spend also means a bigger bridge, more interest and a longer build. Delays hurt more when the budget is bigger, and heavier works can push you into more expensive finance.

Then there are the extras. Everyone wants a cinema room or co-working space. They can cut tenant churn, but make sure the numbers work.

The real test: does the extra rent pay for the extra spend?

Larger HMOs valued commercially are worth their net income divided by a yield. The finish doesn't come into it directly. Only the income does.

Say the ensuites add £80,000 to the build. To get that money back out on refinance, the valuation needs to rise by at least £80,000. At an 8% yield, that means your net income has to rise by £6,400 a year.

Across 8 rooms, that's about £67 more per room per month. And that's after the extra running costs. If the ensuites add £15 per room per month in water, heating and maintenance, each room needs to rent for around £82 more than a shared-bathroom room.

Hit that number and you've only stood still. The valuation has paid back what you spent, but you've made nothing on it yet. Fall short and part of your money stays stuck in the building.

So the question for any deal is simple: will local tenants actually pay that premium?

Commercial valuation

Larger HMOs are valued on income and yield, not on the finish. The valuer won't pay for the spec, only for what it earns.

If there are no high-end comparables locally, you may not get the yield you modelled. That's when money stays stuck in the deal. To de-risk, get yield comparables before you commit, not after the works are done.

The exit

Ensuites in every room make going back to a family home expensive, and the layout rarely works.

That leaves one type of buyer: another investor. Your exit depends on their appetite at the moment you need to sell.

A regular HMO keeps more doors open if the market changes.

What else gets missed

The rent ceiling. Every area has a ceiling on what tenants will pay for a room. Build above it and you're paying for a spec the local market can't support.

Space. Ensuites eat floor area, which can mean smaller rooms or one fewer room. Some councils won't count the ensuite towards the minimum bedroom size either, so check your local standards. As a former HMO tenant, I'd rather share a bathroom with one or two others than live in a box.

Running costs. More bathrooms means more water, more heating and more leaks. If bills are included, that's all yours.

The tenant. Professionals in a strong employment area may expect ensuites. Elsewhere, a clean, well-run shared-bathroom HMO at the right price can fill faster.

The case for high-end

There's no denying that high-end, design-led co-living can mean longer tenancies, fewer voids and a stronger brand. Stuart Scott makes a strong case for it in The Co-Living Revolution. In the right area, with the right tenants, it pays.

How to decide

Before you settle on the spec, answer these:

• What do comparable rooms rent for locally, with and without an ensuite?

• Does that premium cover the extra build cost at the yield a valuer will actually use?

• Are there high-end commercial comparables nearby to support the valuation?

• Who is your tenant, and what will they pay for?

• If you had to sell in five years, who would buy it?

The mistake isn't building high-end. It's building high-end because everyone else is.

As a sourcer, I'd rather the demand decide the spec than the trend.

If you're weighing up spec on a deal right now, send me the numbers. I'll tell you which one they support.