Paragon Bank, a buy-to-let lender that finances HMOs, put HMO gross yields at 8.90% for the second quarter of 2026 in its own yield report, against 6.45% for flats and 6.31% for terraced houses.
That gap is real, but it is measured before a single cost is paid, and an HMO carries costs a single let does not. Pegasus Insight, a paid research firm that runs its landlord survey with the National Residential Landlords Association, reported that HMO landlords spend 45% of average gross rental income on running costs, against 25% for other landlords.
On our worked example below, a 9% gross HMO nets about the same as the same house let whole at 5.6% on lean costs, and less on fuller ones.
In short
- With five rooms, the break-even room rent is £449 a month on lean costs and £537 a month on full costs.
- On lean costs, £8,558 of the HMO’s costs do not move with the rent, almost a third of gross income.
- At £550 a room on lean costs, the same house nets £17,233, a 5.74% net yield.
- Rebuild the net yield yourself from room rents, bills, council tax and the licence fee, rather than trusting a published gross figure.
This guide walks the gross-to-net gap for an HMO specifically. Our general guide to gross and net yield covers the costs every rental carries; the lines below are the ones a shared house adds on top.
Who publishes HMO yield figures
Every HMO yield figure we traced came from a lender, a broker or a paid research survey.
Caveat: We found no official statistical series for HMO yields, so read each number with its owner’s interest in mind.
That includes the “HMO yield gap grows” story, which The Negotiator ran on 5 February 2026 from Pegasus Insight’s Landlord Trends survey for the fourth quarter of 2025.
Paragon’s number comes from its Q2 2026 Buy-to-Let Yields report, reported in July 2026, which draws on the bank’s own lending data. The notes to its Q4 2025 report say its yield data is built from new mortgage offers for purchases and remortgages, averaged over rolling six-month periods.
So it is a gross yield, on properties Paragon offered to lend against, and it carries no information about costs. Paragon publishes the report quarterly, so check the latest quarter before comparing it with a listing.
The cost figures come from Pegasus Insight, which runs Landlord Trends in partnership with the National Residential Landlords Association and sells the reports to subscribers. Paragon has also published landlord research that Pegasus carried out on its behalf. Its release of 6 January 2026 rests on 872 online interviews with NRLA members, carried out between 21 September and 9 October 2025. These are landlords’ own reports, from members of one landlord body, not audited accounts.
The costs only an HMO carries
Pegasus lists running costs as maintenance, servicing, insurance, utilities, professional fees and compliance. The biggest difference it found between HMO and other landlords was utilities, at 16% of HMO landlords’ spending against 4%, because HMO landlords more often include bills in the rent.
Energy, water and broadband for five or six people then sit in your column, and they do not fall when a room is empty.
Council tax moves across too. In England, regulations in force since 1 December 2023 say an HMO must be treated as a single dwelling and widen the class of HMO where the owner, not the resident, pays. On a standard single let the bill normally sits with the adults living there. We covered the banding and the exceptions in our guide, HMO council tax is one band.
For scale, government figures published on 25 March 2026 put the average Band D bill in England for 2026-27 at £2,392. It is a flat cost to the owner of an HMO.
Licensing is the third line. Fees are set by each council; two councils’ 2026 fees give a sense of scale. Cherwell District Council’s fees from 1 April 2026 are £830 for a standard new HMO licence and £1,340 where the house has been unlicensed for six weeks or more, with licences generally issued for five years.
Warwick District Council’s fees from 1 January 2026 are £1,092 for three to five occupants and £1,264 for six to twelve.
Licence transfer: A licence does not pass to a buyer, so a purchase means a fresh application and a fresh fee.
The rest are costs every landlord has, at a higher level. Gas appliances must be checked at intervals of not more than 12 months, and in England the electrics inspected at intervals of no more than five years, on a single let as much as an HMO.
The HMO adds more fire safety equipment to service, furniture that wears out faster, higher management fees, and rooms that turn over individually. The figures below for those four are our own assumptions.
Same house, let two ways
Take a £300,000 house in England, let whole at £1,400 a month or as an HMO with five rooms at £450 a month each, with every input stated.
| Single let | HMO, full costs | HMO, lean costs | |
|---|---|---|---|
| Gross rent | £16,800 a year | £27,000 a year | £27,000 a year |
| Gross yield | 5.6% | 9.0% | 9.0% |
| Costs | £4,324 (25.7% of gross) | £18,226 (67.5% of gross) | £14,456 (53.5% of gross) |
| Net income | £12,476 | £8,774 | £12,544 |
| Net yield | 4.16% | 2.92% | 4.18% |
On lean costs, net income is £12,544, a 4.18% net yield, which is £68 a year more than the single let.
These costs run above the 45% in the Pegasus survey because they include voids and council tax, which are not on its list of running costs. Take those two out and costs are 40.8% of gross on the lean case and 52.9% on the full case, either side of the survey figure.
Show the calculations
| Single let | HMO, full costs | HMO, lean costs | |
|---|---|---|---|
| Voids | One month every two years | Three void weeks per room a year | Two void weeks per room |
| Bills and broadband | £450 a month | £350 a month | |
| Council tax | £2,392, average Band D | £2,392, the same council tax | |
| Licence | Cherwell £830 licence spread over five years | £166 a year licence charge | |
| Management | 12% including VAT | 15% including VAT | 12% |
| Repairs | 6% of rent | 8% | 6% |
| Furniture | £1,000 of furniture replacement | £600 of furniture | |
| Insurance | £400 | £900 | £700 |
| Safety certificates or servicing | £200 a year for safety certificates | £600 for safety servicing | £500 servicing |
So a gross gap of 3.4 points closed to almost nothing on lean costs and turned negative on full costs. The more useful output is the break-even room rent, at which the HMO nets the same as the single let.
Break-even room rent, lean costs
£449 a month
Break-even room rent, full costs
£537 a month
Every pound of room rent above that line is where the HMO earns its extra work.
At £450 a room, the example sits only £1 above the lean break-even line. At £550 a room, gross rent is £33,000, an 11% gross yield, and the same assumptions give net income of £17,233 on lean costs, a 5.74% net yield, and £13,048 on full costs, a 4.35% net yield.
Why HMO net income moves faster
On the lean case, £8,558 of the HMO’s costs do not move with the rent: bills, council tax, the licence, furniture, insurance and servicing. That is almost a third of gross income, and it makes the net figure sensitive to anything that cuts the rent collected.
HMO net income, after a 10% rent cut and voids doubled to four weeks a room
Falls 24%, to £9,499
Single let net income, after a 10% rent cut and a month’s void every year
Falls 16%
The opposing case deserves its full weight. A single let loses all of its income when the tenant leaves, while an HMO rarely has every room empty at once.
Owners who manage well, set bills fairly or achieve room rents comfortably above the break-even line can beat a single let by a clear margin.
The point is narrower: the gross yield alone does not tell you which of those houses you are buying.
Capital value is a separate question from income. For a smaller HMO the usual valuation basis is bricks and mortar, which largely ignores the HMO income, as we set out in HMO valuation: bricks or commercial. Planning matters as well, because where an Article 4 direction applies, turning a family house into a small HMO needs planning permission the council may refuse.
What this means for property investors
Treat any published HMO yield as a gross figure from an interested party, and check whose data it is, what it covers and when it was measured before you compare it with a listing. Then rebuild the net yourself from achieved room rents, with bills, council tax and the licence fee in your column, and your own assumptions for voids, management, furniture and repairs written down.
Work out the break-even room rent against the same house as a single let. If the rooms clear it comfortably after a 10% rent cut, the HMO is paying for its extra work. If they only clear it at today’s asking rents with full occupancy, the gross yield is carrying the deal on its own.
If you own an HMO, a buyer will rebuild your net in exactly this way, so a rent schedule with bills and council tax shown beside it is worth more than a gross figure, as we explain in why an HMO does not sell. Without those lines the buyer has to assume them, and the offer reflects the assumptions.
This is general information, not advice on your situation, so take independent advice before acting.
To see what your HMO is worth, get a free desktop valuation: send us the address and the rent schedule and you will have an evidence-backed range within 24 hours, yours whether you sell or not. If you are buying, browse the HMOs currently on our books.