What is a good net yield for an HMO in this market?

My long-standing benchmark is a net return of around 8% to 10%. With lending at around 6.5%, you need headroom above that. You're not borrowing against the whole purchase price, so the effective cost across the deal is lower, but you still want a margin.

What goes into "net"?

It depends what goes into the figure. Most deal sheets show fixed running costs, plus management where the property is already managed. True running costs also include maintenance, voids, arrears and even the drive to the property. That's where return on investment and return on capital employed come in, and those are personal to you. It's exactly what my HMO Analyser is built to show.

Why 8–9% net is hard right now

An off-the-shelf investor buying a five or six-bed HMO at an investment price, borrowing and outsourcing management, will struggle to reach 8% to 9% net. To get there you'll need to:

• do some of the work yourself
• put in more capital
• buy a larger HMO, or
• buy something tired and add value.

Room rents decide the gap between gross and net

On £1,000 a room, running costs might be around 18% of the rent. On £450 a room, they can be close to half. In parts of the north where average rents sit below £500, expect gross to be 5 to 7 points above net. If you see a 17% gross yield in the North East, you're more likely looking at 8% to 9% net. A 12.5% gross on the south coast, with rooms at around £750, could net close to 9%, because a smaller share of the rent goes on running the house.

In the end, your target depends on what you need the money to do: replace an income, build reserves, or simply grow quietly in the background.

Don't forget stamp duty

Stamp duty rarely appears on headline deal sheets because it depends on the buyer: buying through a company, from overseas with a surcharge, or another structure. Like solicitor's, valuation and arrangement fees, it's left off, and it makes deals look less appealing at first glance. It's still a large upfront cost you won't get back, and on many deals you'll spend years earning it back through the rent. That's why it's built into the analyser.

Quick answers

What is a good net yield for an HMO?

Around 8% to 10% net is a sensible benchmark, giving headroom above borrowing costs of around 6.5%. Reaching it today usually means doing some of the work yourself, putting in more capital, buying larger, or adding value.

Why is HMO net yield so much lower than gross yield?

Running costs take a bigger share of low room rents. On £1,000 a room they might be around 18% of the rent; on £450 a room they can approach half, so in many northern towns gross can sit 5 to 7 points above net.

From my answers on the HMO X Weekly Community Call, October 2026. Figures are illustrative and reflect my experience at the time; they're not financial, legal or tax advice, or a RICS valuation.