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As the demand for cost effective housing continues to soar amongst students and young professionals for example, increasing numbers of investors have sought to diversify their portfolios and maximise existing revenue streams by purchasing multiple occupancy properties (or HMO’s).
Government guidelines define HMO’s as property which is rented by at least three people from a different ‘household’, meaning anyone from a couple who are living together to unrelated singles who live in their own rooms, but share amenities or facilities such as bathrooms, loos or a kitchen. They are often converted from original structures to form a number of additional rooms or rental spaces and are invariably cheaper and therefore more popular than other types of rented accommodation.
Recent research by BDRC Continental has revealed that HMO’s currently offer the highest possible returns for property investors, with HMO’s demonstrating yearly turnovers of 7.1%, 1.3% above the market average.
Properties such as these have become increasingly attractive to investors over the past few years, with multiple tenants and incomes allowing landlords to earn far more from an HMO or MUFB than a property which is rented as a single let, while also providing a buffer against the possibility of void periods or of tenants falling behind with their payments.
As house prices continue to outstrip ratios of income growth amongst young adults and widespread shortages in housing continue to exacerbate levels of demand, as well as comparative increases in rent, multi-occupancy properties have become an increasingly reliable area of market growth; one which is driven both by financial necessity and, in some cases, evolving lifestyle choices. Students and social tenants have traditionally provided the backbone for this sector, but as HMO’s and MUFB’s begin to be designed or renovated to a higher standard than before, they have become increasingly popular amongst a more affluent and stable constituency of renting young professionals.
However, finding high street lenders that are prepared to engage with complex buy-to-let purchases or to offer ‘ready-made’ mortgage products that cater to a range of individual circumstances can invariably prove to be a struggle for most landlords. Commercial lenders have traditionally been regarded as offering the most likely route for those looking to pursue multi-unit options in the past, but as more and more specialist lenders have ventured into this field over the last few years, the vast majority of contemporary buyers have sought to capitalise on the lower rates, faster delivery times and higher levels of expertise that they offer. Indeed, according to research by the Which? consumer website, there are currently 11 providers and approximately 200 HMO mortgage products available on the market, with the overwhelming majority of these being offered by specialist buy-to-let lenders, like Landbay.
Moreover, with lenders offering competitive rates, it’s easy to see why so many investors have come to regard the specialist sector as a natural and invaluable partner for their businesses, because they offer a degree of flexibility and cost effectiveness that is generally unavailable elsewhere.
We envisage growing demand for HMO products from landlords and brokers, who take the time to research the best options, will reap the benefit going forward.
To find out more on the Landbay HMO offerings, please call the impact packaging help desk on 01403 272625.
