Welsh Houses in Multiple Occupation are generating the highest yields across Britain, new data has revealed.

The data from buy to let specialist lender Paragon, based on mortgage applications, shows that Welsh HMOs produce an average yield of 9.01 per cent, generated from an average £29,100 rental income and an average £322,000 valuation.

Yorkshire & Humber is second on the list with landlords in the region generating a yield of 8.61 per cent on HMOs, with the North West third at 8.33 per cent. HMOs in five British regions generate a yield of more than 8.0 per cent.

London is bottom of the regional HMO yield table, generating 6.13 per cent 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 they are typically more expensive to run due to increased maintenance costs. 

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 is where there are five or more residents living in the property with shared facilities.

Paragon Bank Commercial Director for Mortgages Louisa Sedgwick says: “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 adds: “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.”