HMO Yields Hit 9.8% in the North East — But Here's the Number Nobody Quotes

What Fleet Mortgages Actually Said — and What It Didn't

The Fleet data is solid. Average gross yields across England and Wales rose 0.7% year-on-year and 0.4% quarter-on-quarter to reach 8.1% nationally, per the [fleet-mortgages.co.uk](https://www.fleetmortgages.co.uk/news/all-regions-in-england-wales-show-annual-increase-in-rental-yields-fleet-mortgages-q1-2026-rental-barometer/) report. The North East leads at 9.8%, Yorkshire and Humberside at 9.0%, West Midlands at 8.6%. Six regions now sit above 8%. That's genuinely good news.

Paragon Bank's own Q1 2026 Buy-to-Let Yields report, published 15 April, adds a useful cross-reference: HMOs specifically averaged 8.78% gross yield in Q1, up 0.17 percentage points on the previous quarter, per [mortgagesoup.co.uk](https://mortgagesoup.co.uk/wales-and-north-east-top-btl-yield-table-as-returns-edge-higher/). So the HMO premium over vanilla BTL is real and measurable.

But every single one of these figures is gross. Before a single bill is paid. Before a licence fee. Before a void week. Before the letting agent takes their cut.

Steve Cox, Chief Commercial Officer at Fleet Mortgages, was candid about the macro picture: much of the Q1 data reflects January and February, before swap rates spiked in March due to geopolitical volatility. The market today looks different. I'd extend that candour to the yield figures themselves — they reflect income potential, not income delivered.

The Gross-to-Net Collapse: Where the 9.8% Actually Goes

This is the section most content creators skip. I won't.

Take a North East HMO running at 9.8% gross yield. Typical property value in that region for a 5-bed HMO: call it £130,000–£160,000. Annual gross rent at 9.8% on a £145,000 asset: roughly £14,210.

Now start subtracting.

Management fees for HMOs typically run 12–15% of gross rent — higher than standard BTL because of the operational complexity. On £14,210 that's £1,705–£2,132 gone immediately. Then mandatory HMO licensing: Article 4 areas require a selective or additional licence, typically £500–£1,200 per property per cycle (usually 5 years, so £100–£240 annually). Utilities — because most HMO landlords include bills — average £80–£120 per room per month in the current energy environment. On a 5-bed, that's £4,800–£7,200 annually.

Voids. Even a well-managed HMO in a strong rental market will see 2–4 weeks of void per room per year across a 5-bed portfolio. At average North East HMO room rents of roughly £450–£500 per month, two weeks void per room costs approximately £1,125–£1,250 in lost income.

Compliance costs — fire safety, gas safety certificates, electrical installation condition reports, EPC upgrades — add another £300–£600 annually depending on the age and condition of the property.

Do the maths. On that £14,210 gross income figure, you're looking at deductions of £8,000–£11,000 once management, utilities, voids, licensing, and compliance are factored in. Net yield: somewhere between 4.5% and 6.2% on the asset value. Not 9.8%.

That's not a disaster — a 5–6% net yield on a leveraged asset in a rising rental market is still a respectable position. But it's a completely different investment thesis than the headline implies.

And this is before mortgage costs. With limited company 5-year fixes currently sitting sub-5% for strong profiles (per the research notes from Fleet's own data), the debt service on a 75% LTV product on a £145,000 property at 4.9% costs roughly £5,300 annually in interest. Strip that out and your cash-on-cash return on the equity deployed starts to look thin — unless you bought well below market value or have significant rent growth baked in.

Cash-on-Cash Return: The Metric That Actually Matters

Cash-on-cash return is the number I want every HMO investor to quote instead of gross yield. It's simple: annual net cash flow after all costs including mortgage, divided by the cash you actually deployed (deposit plus purchase costs plus refurb).

Why does this matter more? Because gross yield tells you nothing about your financing structure, your operational model, or your actual return on capital. Two investors can own identical properties in the same street, both at 9.8% gross yield, and one can be cash-flow positive while the other is subsidising the property every month — purely based on LTV, purchase price, and whether they self-manage or use an agent.

Here's a rough city-by-city picture using the HMO-specific data available. Manchester and Liverpool HMO gross yields are running around 9.1–9.2% according to market data from specialist HMO brokers. Birmingham sits around 8.9%. London drops to 6.8% — and once you factor in higher purchase prices, higher management costs, and the complexity of London licensing, net yields there are genuinely marginal for most investors.

The cities where cash-on-cash maths works best right now, in my view: North East (Sunderland, Middlesbrough specifically), certain pockets of West Yorkshire (Bradford, Wakefield), and parts of the West Midlands outside Birmingham city centre. Why? Lower acquisition costs relative to rental income, strong student and professional tenant demand, and more predictable void rates.

The cities where the gross yield headline is most misleading: anywhere in Greater London (Fleet data: 6.1% gross, Paragon data: 5.74% gross — and net yield after London's higher operating costs can dip below 3%), and parts of the South East where entry prices have inflated faster than rents.

One trade-off worth naming explicitly: the highest-yielding areas are often the hardest to finance at competitive rates. Some specialist lenders apply a regional risk premium to North East properties, which can nudge your mortgage rate 0.2–0.4% higher than equivalent assets in the Midlands. That's worth modelling before you commit.

What the Fleet Data Does Tell You — And Why It Still Matters

I don't want to dismiss the Fleet Barometer. It's one of the most useful publicly available datasets in UK BTL, and the directional signal — yields rising across every single region annually — is meaningful.

The 78% limited company borrowing figure is particularly telling. That's not just a tax efficiency play; it signals that the investor base is becoming more sophisticated and more long-term oriented. When 78% of applications come through limited company structures, per [landlordknowledge.co.uk](https://landlordknowledge.co.uk/rental-yields-hit-8-1-as-north-east-leads-uk-with-9-8-returns/), you're looking at a market dominated by people who've done the tax calculation, engaged an accountant, and are thinking in decades not years.

The portfolio concentration data reinforces this: 30% of applications now come from landlords with 15+ properties. Over 63% from those with four or more. The accidental landlord era is ending. The professional operator era is here.

For HMO investors specifically, that's a competitive dynamic worth tracking. As the operator base professionalises, the easy wins — undermanaged properties with below-market rents in strong locations — become harder to find. You need sharper sourcing, tighter due diligence, and a clear operational model before you buy, not after.

The broader macro caveat from Steve Cox at Fleet is also worth heeding: Q1 data reflects January and February conditions. Swap rates spiked in March. Product withdrawals followed. If you're modelling a purchase today, the financing environment is materially different from what the Q1 data implies — and that gap directly affects your cash-on-cash return calculation.

Every yield headline you read this month is a starting point, not a destination. The 9.8% North East figure from Fleet Mortgages is real, it's directionally correct, and it reflects genuine rental market strength. But the investors who build durable HMO portfolios are the ones who run the full cost stack before they exchange contracts — not after. Gross yield is a marketing number. Net yield is a management number. Cash-on-cash return is the investment number. Know which one you're quoting.