Your Business and Industry

27 September 2021

HMO yields exceed other property types… but so do costs.

The return to studying without Covid restrictions represents great news for students and landlords alike as towns with large student populations have long proved attractive investment opportunities, as shown by our continued landlord interest in mortgages for HMOs.

Our Q2 2021 research with BVA BDRC Landlord Panel revealed that HMO lettings continue to generate significantly higher average rental yields (6.8%) when compared to other property types. Bungalows were said to generate the lowest average rental yields at 5.5%.

When it comes to cost, landlords are typically spending a higher proportion of their rental income on running and maintaining HMO properties. On average, landlords with HMOs spend around 30% of their gross rental income running and maintaining them, compared to the 23% of income spent by those running and maintaining non-HMO properties. Estimated expenditure on HMOs and non-HMOs has increased year-on-year, by around 4%pts and 3%pts respectively. 

Buy to let mortgages with flat fees and fee-assisted options

We’ve seen the buy-to-let market moving steadily towards a stronger level of professionalism for some years now, and this has meant a growing number of landlords are now defined as ‘portfolio’ operators and are maximising their returns with a greater proportion of HMO, multi-unit block (MUB) and short-term let property types.

With an increasing variety of highly competitive options now available across the specialist BTL market, more landlords are working closer than ever with advisers to assess how their portfolios are being financed and structured. This trend outlines the ongoing potential for proactive intermediaries who are looking to maximise the opportunities being generated by the ever-evolving BTL sector.

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FOR INTERMEDIARIES ONLY

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