A new report shows the high sums being invested by HMO landlords despite rising costs and more regulation and tax.

Paragon Bank says some 28% of HMO landlords expect to spend over £10,000 on property improvements during the next 12 months. 

A further 15% anticipate spending between £5,001 and £10,000.

The bank’s study also reveals that three-quarters have let their HMO for at least 10 years; around 80% say they intend to maintain or expand their overall property portfolios during the next year.

Paragon found 62% of HMO landlords had carried out improvements within the previous six months, with another 24% completing work during the past year.

And some 54% are ‘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.

Paragon data suggests that HMOs produce an average yield of 8.90% – the highest of any property type recorded by the bank.

Managing director Louisa Sedgwick 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.”