Aspiring landlords turn to HMOs and MUBs for bigger returns

Aspiring landlords turn to HMOs and MUBs for bigger returns

0:01 AM, 2nd October 2024, About A week ago 3

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Aspiring portfolio landlords are turning to more complex rental properties, such as Houses in Multiple Occupation (HMOs) and multi-unit blocks (MUBs), as they build their property businesses, research reveals.

According to a new survey by Paragon Bank, these landlords are increasingly drawn to these higher-yielding properties due to the significant demand for rented housing.

The survey, which involved 500 landlords with three or fewer properties, found that while only 8% currently invest in HMOs, this figure rises to 17% when looking at future acquisitions.

Similarly, the proportion of landlords investing in MUBs is expected to grow from 14% to 26%.

The report from the lender matches findings published recently by Shawbrook that growing numbers of landlords are interested in buying MUBs.

Start with simple buy to let propositions

Paragon’s mortgages commercial director, Russell Anderson, said: “The majority of landlords start building their portfolios with simpler buy to let propositions, such as self-contained flats or terraced houses.

“These properties have been the staple of the private rented sector for many years and will continue to be.

“However, as they build experience and, for many, letting becomes a business, we see portfolio landlords typically moving into more complex buy to let through higher yielding HMOs and MUBs.”

He added: “With the demand for rented property significantly outweighing supply, the need for HMO style property is growing and we expect this to be a strong market segment for years to come.”

Paragon’s ‘Next Generation Landlord Report’

The findings are included in Paragon’s ‘Next Generation Landlord Report’, which examines who these landlords are and their aspirations.

While terraced housing remains a popular choice for landlords, with the proportion expected to increase from 26% to 37%, there is also growing interest in detached homes (36% to 40%) and bungalows (11% to 24%).

Conversely, flats and semi-detached houses recorded a slight fall, with 42% of this cohort currently owning flats and 42% intending to buy in the future, with semi-detached homes dropping from 36% to 34%.

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Cider Drinker

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9:06 AM, 2nd October 2024, About A week ago

There was a great programme recently on BBC (I think). Maybe a year or so ago.

It showed how we are recreating the slums of yesteryear by making 3 bed homes that were built to replace the slums of the 1800s into HMOs. Tiny spaces to store people more efficiently.

It is a national disgrace in my considered opinion.

Reluctant Landlord

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14:36 PM, 2nd October 2024, About A week ago

'aspiring'? Hmmm.

Any existing professional LL knows this is not the nirvana that is promoted on so many levels.

The words 'high yield' and 'HMO' tend to draw in the chancers and those who look to buy in cheap areas and max out capacity because yes there is an overflow of need for 'passing over' certain tenant types who cost LA's dearly...

Enter Rachman the latest version....

Paul McCarthy

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13:27 PM, 3rd October 2024, About 7 days ago

Reply to the comment left by Reluctant Landlord at 02/10/2024 - 14:36
I’m not sure I completely agree with you. I currently own 3 HMOs and specialise in housing individuals with mental health challenges in Crawley. Without this kind of support, I’m not sure who would be willing to take in such vulnerable people. Don’t get me wrong, I do make a 15% yield, but I believe I’m giving back in a meaningful way.

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