"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"
- Vann Vogstad - COHO
New analysis from HMO management platform COHO has revealed that larger HMOs deliver higher rental yields across England, with six-bedroom properties achieving the most favourable returns. The findings highlight a clear link between property size and profitability, despite the greater upfront investment required.
Based on current market data, three-bedroom HMOs in England generate an average yield of 7.1%. This figure is derived from an average asking price of £302,546 and a typical monthly rent of £593 per room.
However, yields rise considerably with an extra bedroom. Four-bedroom HMOs currently offer an average yield of 8.5%, supported by an asking price of £336,252, only slightly above that of a three-bed property.
Yields are strongest for five- and six-bedroom HMOs, both averaging 8.7% across England.
City-level yields outpacing the national average
In some cities, returns are significantly higher. Bradford leads the way, where six-bedroom HMOs produce an average yield of 15.2%. This is based on an average property price of £228,750 and monthly rental income of £482 per room.
Liverpool and Leicester also perform well, with average six-bed HMO yields of 10.8% and 10.1% respectively.
Bradford also offers the highest average yield for five-bed HMOs at 10.1%, followed by Leicester at 10% and Leeds at 9.8%.
Liverpool ranks highest for four-bedroom HMOs, delivering average yields of 11.9%, ahead of Sheffield (10.2%) and Nottingham (9.6%).
Meanwhile, the strongest three-bedroom HMO yields are found in Newcastle at 10.7%, followed by Manchester (9.8%) and Liverpool (9.3%).
“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,” said Vann Vogstad, founder and CEO of COHO. “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.”
Co-living: a potential solution for Southern Landlords
While landlords in the north may achieve strong returns with traditional HMOs, a new model is emerging that may offer better potential in southern markets: co-living.
“Co-living is distinct from HMOs in a number of ways, not least the way in which they are conceived, designed, and managed,” explained Vogstad. “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 likeminded 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. What’s more, a well-branded co-living development can be easily replicated in other locations, even other cities, enabling landlords to build a strong portfolio of co-living assets.
“It’s certainly worth thinking about. While HMO landlords in the north can enjoy incredible yields by delivering nothing more than what HMO tenants expect, in the south it might be time to delve into the unexpected to start attracting a whole new demographic of tenants, otherwise known as the next generation of housemates.”
