HMO Landlords Are Spending More, But Are Returns Keeping Up?

HMO landlords are continuing to invest in their properties despite rising improvement costs, with new research showing strong confidence in the sector. But as spending increases, landlords need to ask whether higher rental yields are translating into stronger overall returns.

Research from Paragon Bank found that 80% of HMO landlords plan to either increase or maintain their portfolios over the next 12 months. At the same time, 28% expect to spend more than £10,000 on property improvements.

For landlords, this raises an important question: are higher HMO yields still worth the additional costs?

Why Are HMO Landlords Continuing to Invest?

HMOs can generate higher rental income than traditional single-let properties, but they also tend to require more management and investment.

According to Paragon, 62% of HMO landlords have improved a property within the past six months, while 54% are extremely likely to carry out further improvements over the next year.

Improvements can range from general refurbishment to fire safety, compliance and energy-efficiency upgrades.

For landlords, investing in the property can help maintain its condition, remain competitive and potentially support rental income.

Higher Yield Doesn't Always Mean Higher Profit

Paragon's research found that 82% of HMO landlords believe HMOs provide better rental yields than other residential lettings, while 79% believe they generate stronger returns. Its data also showed an average HMO yield of 8.9% in Q2 2026.

However, gross yield only tells part of the story.

HMO landlords also need to consider:

Once these costs are taken into account, the property's actual return can look very different.

Is £10,000+ Investment Worth It?

A major improvement shouldn't simply be viewed as an expense.

Landlords should consider what the investment is expected to achieve.

Could it increase rental income?

Could it reduce future maintenance costs?

Is it required for compliance?

Could it help reduce void periods?

Will it protect the property's long-term value?

For portfolio landlords, it's also worth comparing the potential return from improving an existing property against investing the same capital elsewhere.

Look Beyond Individual Properties

As HMO portfolios grow, landlords need to understand more than just monthly rental income.

Knowing which properties generate the strongest returns, where costs are increasing and where further investment could add value can help landlords make better decisions.

This is particularly important when individual improvement projects can cost thousands of pounds.

How Propell Can Help

Propell helps landlords bring key property information together in one place, including live valuations, rental comparables, compliance information and portfolio insights.

With a clearer view of property performance, landlords can make more informed decisions about where to invest, what to improve and which properties are delivering the strongest returns.

Higher rent doesn't automatically mean higher profit. For landlords, having a clear view of income, costs, property value and long-term performance can help ensure every investment decision makes financial sense.