Your Business and Industry

16 November 2021

HMO yields 1.3% more than other properties

In recent times, we’ve seen landlords take many different approaches to their portfolios but one constant is the search for greater yield.

This has led to an increased focus on HMOs and growing flexibility has emerged in the way lenders are approaching this property type.

Focusing on this important yield issue, our latest landlord panel research for Q3 2021 in partnership with BVA BDRC outlined that HMO lettings continue to generate significantly higher average rental yields compared to other property types, at 7.2% versus an average 5.9%. Linked to this, landlords letting to students also achieve above average yields, at 6.7%.

But how much does it cost to run an HMO?  

In terms of costs, on average, landlords with HMOs spend around 24% of their gross rental income running and maintaining them, compared to the 22% spent by those running and maintaining non-HMO properties. Estimated spending on HMOs is marginally down year-on-year (-1.1%), whilst spending on non-HMOs has edged up slightly (+1.4%). In addition, landlords with non-HMOs have spent considerably more on improving property to comply with Energy Efficiency Standards compared to those with HMOs.

Mortgages especially for portfolio landlords – how we can help

This data offers great insight into yield and costs. With landlords looking to diversify their portfolios to minimise risk and bolster yields, HMO’s are a growing force in the BTL sector and market forces dictate that there will be further competition within this product field as an increasing number of options emerge. This growing trend underlines the importance of advisers establishing relationships with specialist lenders, such as Foundation Home Loans, who have the underwriting capabilities to assess such cases on an individual basis and the product range to meet a variety of landlord needs.

So, if you have landlord clients who may be looking to add an HMO to their portfolio or refinance an existing HMO property, then why not speak to our team to see how our product range might work for them.

Contact your BDM

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