A House of multiple Occupancy is a property rented out by at least 3 people who are not from 1 “household” (e.g. a family) and they share toilet, bathroom and kitchen facilities with other tenants.
As professional landlords seek out more diverse ways to improve their yields, we expect specialist property lending to maintain its strength next year, and for specialist lending to be the fastest area of growth for broker advice.
No upfront fees
However, it is clear that an important factor for landlords looking at raising capital for purchasing is that they are able to access competitive interest rates without onerous initial outlay. It is for this reason that the new range of buy to let 5-year fixed rate mortgages from Foundation with no basic valuation fee or upfront arrangement fee are available for HMOs with up to 6 tenants up to 75% loan to value up to 750k and 65% up to £1.5 million. Whilst prospective HMO landlords will of course be undertaking their own thorough surveys of the property, cutting out the lender valuation and arrangement fee should make the whole project much easier to embark upon.
As with most Foundation products, other specialist properties can often be considered as cases are flexibly underwritten on their merits.
A way for your professional landlords to branch out
The HMO rental sector is not without its problems; the high rental yield is a direct result of the types of tenant they are suitable for. HMOs are predominantly residence to renters paying individually and only able to commit to shorter term contracts, such as revenue migrant workers (yield 6.5%) and students (yield 5.9%). It is for this reason that the sector has seen a fall over the last two years.
“My Wales property is an HMO, reliant on EU migration. Brexit has killed the market”. Survey respondent.
It is therefore understandable that the majority of landlords only decide to branch out into HMOs as an addition to an already diverse portfolio which can mitigate somewhat the periods of lower rental income. 11% of landlords with only one property have an HMO, however 41% of landlords with a portfolio between 11 and 19 properties have an HMO.
We are your experts in specialist lending. Can we help you expand your advice expertise into non-standard properties, limited company buy-to-lets or borrowers with credit blips for 2020? Speak to your local BDM today.