HMOs are the most profitable property type for landlords, with research revealing an average yield of 7.3%.
According to the Landlord Trends Report Q4 2025, Pegasus Insight found these continue to outperform the wider market.
Overall, 85% of landlords — interviewed in December and January — reported their lettings as profitable though this was down 4% from the preceding quarter.
There was also an uptick in the proportion reporting a financial loss while rental yields edged down to 6.4%. These had been 6.6% in the third quarter.
Mark Long, managing director and founder at Pegasus Insight (pictured above), said this was presenting evidence of a “clearer separation” between landlords’ business models.
“Higher-yielding, more intensively managed portfolios, particularly HMOs, continue to provide a degree of insulation, while more traditional portfolios have less flexibility as costs and complexity remain challenging,” he said.
“The risk to BTL landlords is not a sudden deterioration in performance, but a more gradual erosion of resilience.
“In an environment where yields are no longer rising, the ability to absorb further regulatory, operational or economic pressures will increasingly depend on the strength of landlords’ financial structures and the scale and mix of their property portfolios.”
