Landlords increasingly diversify portfolios with HMOs

Landlords increasingly diversify portfolios with HMOs

0:03 AM, 15th April 2024, About 2 months ago 2

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Houses in Multiple Occupation (HMO) are becoming increasingly popular among landlords in the UK, according to data from specialist lender Shawbrook.

It says there is a shift in buy to let strategies as landlords navigate a challenging economic landscape.

While HMOs consistently made up around a quarter (27%) of Shawbrook’s BTL mortgage business in 2022 and 2023, the figure has already jumped to over a third (34%) in 2024.

Notably, there’s also been a rise in HMO investment from non-portfolio landlords, increasing from 17% to 21% during the same timeframe.

‘HMOs have proven to be a sound strategy for landlords’

The lender’s director of real estate proposition, Daryl Norkett, said: “As landlords have dealt with years of challenges stemming from the pandemic and culminating in the past couple of years of economic uncertainty, HMOs have proven to be a sound strategy for landlords looking to diversify their portfolios, as well as strong option for non-portfolio landlords entering the market.

“HMO rental yields are more easily able to afford mortgage lending in a higher interest rate environment, and the regular turnover of tenants allows landlords to stay on track with market rents.”

He added that the ability to reconfigure a property to turn a lower yielding single let into higher yielding HMOs has proved to be very attractive over the past year.

Landlords are adjust their businesses to succeed

Mr Norkett says that landlords are adjust their businesses to succeed in a tougher economic environment and added: “We have already improved our HMO criteria to enable landlords to secure larger maximum loan sizes.

“And, whilst we have already seen a modest increase in HMO activity, once the predicted interest rate cuts finally arrive, we’d expect to see significant growth in this sector.”

He continued: “HMOs have emerged as a reliable strategy for landlords seeking to diversify their portfolios and for those new to the buy to let market.”


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Comments

Cider Drinker

9:03 AM, 15th April 2024, About 2 months ago

Property owners are trying to make their properties profitable.

Some cannot break even with a traditional let so switched to holiday lets. Now that FHL is the government’s latest target to fix problems they made themselves, HMOs are an obvious next step.

Some landlords are letting 2 bed properties as HMOs to LHA claimants. A couple pretending to be two single households can pay more than a couple. As well as more LHA, they get two bedrooms.

paul fenton

7:22 AM, 20th April 2024, About 2 months ago

Although rents went up on HMO's to account for energy bills in recent years , rents appear to be on a downward trend at the moment in my area with more supply on the market

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