Welsh houses in multiple occupation (HMO) generate the highest yields across Britain, Paragon Bank data has revealed.
The data from the buy-to-let (BTL) specialist, based on applications, showed that Welsh HMOs produced an average yield of 9.01%, generated from an average £29,100 rental income and an average £322,000 valuation.
Yorkshire and the Humber was second on the list, with landlords in the region generating a yield of 8.61% on HMOs, with the North West third at 8.33%.
London was bottom of the regional HMO yield table, generating 6.13% from rental income of £52,900 and an average property value of £863,000.
Yields on HMOs are generally higher than other property types as they are let on a per-room basis, but this property type is typically more expensive to run due to increased maintenance costs.
A property is classed as an HMO if at least three tenants live in the property, forming more than one household, and sharing a toilet, bathroom or kitchen facility.
A large HMO has five or more residents living in the property with shared facilities.
Louisa Sedgwick, commercial director for mortgages at Paragon Bank, 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.
“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.”
