HMO landlords are planning five-figure property improvements as licensing, safety requirements and higher running costs add to ownership pressures, Paragon Bank reveals.
Its research found that 28% of the landlords they questioned are expecting to spend more than £10,000 over the next year.
That was the most common response, and 15% say they are budgeting between £5,001 and £10,000 for work on their properties.
Meanwhile, 80% of landlords intend to increase or maintain their overall portfolio during the coming year.
Landlords keep investing
The lender's managing director of mortgages, Louisa Sedgwick, said: "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."
She added: "What stands out is that landlords are continuing to invest as standards, costs and regulation evolve.
"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."
Property improvements continue
Paragon also found that 62% of HMO landlords had improved a rented property within the previous six months.
Another 24% of landlords said they had carried out work during the past year.
When asked about future plans, 54% of landlords said they were extremely likely to make further improvements, while 18% were already upgrading properties.
Their planned improvements include decoration, kitchens, bathrooms, alarms, fire doors, energy efficiency measures and other regulatory or compliance improvements.
HMO yields reach 8.9%
Around 82% of those questioned agreed that HMOs offer more rent yields than other residential letting properties.
A further 79% of landlords said the properties produce better profitable returns.
Paragon's lending data recorded an average HMO yield of 8.9% during the second quarter of this year, the highest figure among the property types measured by the bank.
Three quarters of respondents said they had let property for at least 10 years.
And more than half named long-term investment as a principal reason for entering the HMO sector.
Rent arrears reach record low
Separate Paragon Bank research has found that the proportion of landlords experiencing rent arrears has fallen to its lowest recorded level.
During the second quarter of 2026, 26% of landlords reported arrears in the previous 12 months, down from 30% in the first quarter.
Some 86% said their letting activity was profitable, up two percentage points, while average gross rent yields reached 7.02%.
Paragon's mortgage lending director, Lisa Steele, said: "We often hear about the pressures facing landlords, whether that's economic uncertainty, regulatory change or the wider costs associated with running and maintaining properties.
"What's sometimes overlooked is that the overwhelming majority of tenancies work well and continue to provide reliable income for landlords."
HMO landlord budgeting
Simon Thompson, the managing director of Accommodation for Students, said: "There's no doubt that rising compliance costs make careful budgeting essential.
"While landlords might see strong yields for justifying upgrades, they still need to be confident that local tenant demand supports the room rates."
He added: "Experienced HMO landlords should always protect cash reserves before expanding or upgrading a property.
"There are hefty overheads such as fire safety, licensing and EPC work which deserve priority because mistakes can threaten returns."
