More than a fifth of landlords (21%) who are planning to buy over the next year are looking to add Houses of Multiple Occupation (HMOs) to their portfolios, Precise Mortgages has revealed.
HMOs are proving to be an attractive proposition in a time of market uncertainty, with HMO landlords achieving the highest average rental yields at 6.3%.
Alan Cleary (pictured), managing director of Precise Mortgages, said: “In a time of market uncertainty, HMOs are an attractive option for professional landlords looking to maximise yields.
“As HMOs attract multiple tenancies, gross rental income tends to outstrip single lets meaning the rental income is more secure if one tenant leaves a void.
“The expansion of the HMO sector underlines how experienced landlords are rebalancing their portfolios.
“It also demonstrates the opportunity for brokers to work with specialist lenders who have expertise across the widest product set to support clients who are reassessing their portfolios.”
Average yields for all property types dropped 0.3% in Q2 and are now at their lowest level since 2010.
The most popular type of property to buy are terraced houses, with half of landlords planning to buy a terraced property.
However, 40% of landlords also plan to sell terraced houses in the year ahead.
By contrast, just 8% of landlords holding HMOs in their portfolios plan to sell them.
Blocks of flats are also set for growth, with 8% of landlords planning to buy compared with just 5% planning to divest.
Cleary added: “To help landlords explore new opportunities, we’ve extended our top slicing feature across our entire buy-to-let range.
“It means landlords can now use their surplus HMO income for future property purchases to expand their portfolios.
“We also offer refurbishment buy-to-let for works being completed under permitted development rights, provided there are no structural alterations or changes to the footprint of the property.
“This is a really exciting development as it allows landlords to change the use of a property from a C3 dwelling house to a C4 HMO of up to six bedrooms.”