The bigger the HMO, the bigger the yield, new research has confirmed.
HMO management platform COHO found that across the country, smaller properties with three bedrooms generate an average yield of 7.1%.
This is based on an average three-bed HMO asking price of £302,546 and an average £593 per room per month.
Average yields on a four-bed HMO are stronger at 8.5%: for a four-bed HMO, the average asking price is £336,252, but the landlord makes an extra £593 per month – or £2,372 per month.
Five and six-bed HMOs offer the highest average yields of 8.7% across England.
There are plenty of variations.
In Bradford, where the average price of a five or six bedroom HMO is just £228,750, the average rental income is £482 per room, giving a yield of 15.2%. And in Liverpool, six-bed HMOs generate an average yield of 10.8%, while in Leicester it is 10.1%.
COHO chief executive Vann Vogstad says: “The most profitable HMOs are located in cities in or towards the north of England where property prices are significantly lower than the likes of London and the south.
“And while London landlords benefit from a much higher monthly rental income, it’s still not enough to offset the large upfront investment to an extent that will bring yields on par with those available in the likes of Bradford or Liverpool.
“However, all is not lost for the capital’s landlords because a new shared living sector has emerged over recent years which promises to bolster yields in the capital and beyond.
“Co-living is distinct from HMOs in a number of ways, not least the way in which they are conceived, designed, and managed.
“Co-living is, much like the build-to-rent sector, marketed towards well-employed young professionals who are willing to pay a rental premium in order to live in a top quality property with like minded housemates, onsite amenities and flexible tenancies that suit the world of nomadic lifestyles and remote working.
“For London’s landlords, this presents a massive opportunity.
“If you can provide a high-spec property with strong on-site services and amenities, you are able to charge significantly higher rents than those typically associated with HMOs.”
