Where the best yielding HMO properties are

Houses in Multiple Occupation (HMOs) in Wales have emerged as the highest yielding properties in Britain, a survey reveals.

According to Paragon Bank, Welsh HMOs produce an average yield of 9.01%, generated from an average £29,100 rental income and an average £322,000 valuation.

The BTL specialist says that Yorkshire & Humber is second with landlords there generating a yield of 8.61% on HMOs.

In third place are HMOs in the North West at 8.33% – and the survey highlights that five British regions see HMOs generating a yield of more than 8%.

London had the lowest HMO yield

However, London had the lowest HMO yield of 6.13%, despite having the highest rental income of £52,900 and the highest property value of £863,000.

The survey found that HMOs generally perform better than other types of BTL properties, such as flats or terraced houses, as they charged rent on a per room basis.

Despite the high yields, HMOs also have higher running costs, such as maintenance and licensing fees, and required more management from landlords.

‘Demand for HMOs has grown in recent years’

Paragon’s commercial director for mortgages, Louisa Sedgwick, said: “Demand for HMOs has grown in recent years as the quality of the accommodation has risen, with facilities such as ensuites becoming commonplace.

“HMOs are moving up the quality scale as tenants demand more space, better services and access to private facilities.”

She added: “Although yields measured as the ratio of rental income to property price are strong for the market, the actual landlord return, which is rental income versus mortgage payments, is even stronger for this property type, but they are typically more labour intensive than a standard buy-to-let property.

“The key to a successful HMO proposition lies in the experience of the landlord, the location and understanding the target tenant market.”

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