HMO landlords are continuing to invest significant sums in their properties despite rising costs and greater regulatory demands, according to new research from Paragon Bank.
More than a quarter (28%) expect to spend over £10,000 on property improvements during the next 12 months, the most common level of planned expenditure recorded by the research. A further 15% anticipate spending between £5,001 and £10,000.
The findings point to a relatively established HMO landlord population, with three-quarters having let property for at least 10 years and more than half citing long-term investment as one of their main reasons for entering the sector.
Four in five also intend to maintain or expand their overall property portfolios during the next year.
LANDLORDS KEEP INVESTING
Paragon found 62% of HMO landlords had carried out improvements within the previous six months, with another 24% completing work during the past year.
Looking ahead, 54% said they were extremely likely to undertake further improvements over the coming 12 months, while 18% are already carrying out upgrades.
Spending ranges from decoration and improvements to kitchens and bathrooms through to compliance work, fire doors and alarms, and measures designed to improve properties’ energy efficiency.
The investment comes as HMO landlords contend with higher operating costs, licensing requirements and regulatory changes.
However, 82% believe HMOs deliver better rental yields than other residential rental properties, while 79% said they generate better profitable returns.
Paragon’s own lending data showed HMOs produced an average yield of 8.90% during the second quarter of 2026 – the highest of any property type recorded by the bank.
‘LONG-TERM VIEW’
Louisa Sedgwick (main picture), Managing Director of Mortgages at Paragon Bank, says: “These findings show that many HMO home providers are experienced operators who continue to take a long-term view of the sector.
“HMOs can be more complex to manage than standard buy-to-let properties, but they remain attractive to landlords who understand the market and have the expertise to operate successfully within it.
“What stands out is that landlords are continuing to invest as standards, costs and regulation evolve. The level of planned expenditure suggests that many are focused on maintaining quality, supporting compliance and ensuring their properties remain well positioned over the long term.
“For brokers, this creates opportunities to support landlords who are reviewing their portfolios, funding improvement works or looking to structure borrowing around more specialist property types.
“Understanding the reasons behind that investment, whether linked to asset quality, regulatory requirements or long-term returns, is increasingly important when advising clients in the HMO market.”
