14:06 PM, 10th September 2019, About 3 years ago
Research conducted by BVA BDRC on behalf of Precise Mortgages reports HMO landlords are currently receiving the highest average rental yields in the market at 6.3%. This compares to the overall average rental yield of 5.5% for private landlords.
HMO investment popularity remains strong in the face of increased regulation and punitive tax reforms in the shape of section 24 mortgage interest relief restrictions with supply into the market set to grow in the next year. The evidence being a quoted 21% of landlords reporting back in the research they plan to buy an HMO property in the next 12 months and only 8% saying they were looking to sell an HMO property.
Alan Cleary, Managing Director at Precise Mortgages, said:
“It was initially feared the new legislation, which the government estimated would affect around 160,000 properties, could put the brakes on what has become an increasingly popular area of the market in recent years. Some thought the cost of the work needed to convert properties to obtain a licence or the loss of income from rooms that were now too small under the new rules could put new investors off or persuade existing HMO landlords to exit the market.
“However, it appears those fears were unfounded. Not surprisingly, landlords looking to rebalance their portfolios after years of being buffeted by the storms from the regulatory and tax changes are still tempted by the attractive rental yields potentially on offer. Many landlords are also attracted by the peace of mind that comes with knowing that rental income is more secure, even if one tenant leaves a void.”
“We’ve recently extended our top slicing feature across our entire buy to let range to include HMO customers. It means landlords can now use their surplus earned income or portfolio income to demonstrate they could meet any financial stresses on their new property, rather than through the rental income of the property alone. We now 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 for up to six bedrooms.
So as some doors shut in certain areas of the market, different ones are opening up, particularly for those investors who are prepared to step over the threshold and explore the new opportunities on offer.”
Precise Mortgages HMO range highlights:
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