Wales offers best HMO yield

According to Paragon, Yorkshire and the Humber took the second position with average HMO yield of 8.61 per cent equivalent to a rental income of £26,600 with a value of £308,000.

The North West took the third slot with an average HMO yield of 8.33 per cent, rental income of £27,000 and value of £324,000.

HMOs in five out of the 11 British regions had an HMO yield of eight per cent or more.

London was bottom of the list with an average HMO yield of 6.13 per cent, rental income of £52,900 and value of £863,000.

This was followed by the South East at 7.18 per cent, with rental income coming to £36,100 and value pegged at £503,000.

The South West was third from the bottom with an average HMO yield of 7,48 per cent, rental income of £35,800 and value of £478,000.

Paragon Bank 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 en-suites becoming commonplace. HMOs are moving up the quality scale as tenants demand more space, better services and access to private facilities.

“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.”

She added: “The key to a successful HMO proposition lies in the experience of the landlord, the location and understanding the target tenant market. We are specialists in lending to HMO landlords, especially on large HMOs of up to 20 sharers, so can offer a unique insight into how this segment of the market is performing.”