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HMOs still topping the rental yield charts
The ongoing impact of tax, policy and regulatory changes are encouraging a greater number of landlords to explore tax efficient methods, alternative property types and limited company structures
We continue to see a far more methodical approach being taken by portfolio landlords when adding to and restructuring their portfolios. This increased focus has largely stemmed from the ongoing impact of tax, policy and regulatory changes, with these changes encouraging a greater number of landlords to explore more tax efficient methods, alternative property types and limited company structures.
Yield also plays a key role within this outlook, with HMOs and MUBs still leading the way. As highlighted in the Q2 2023 Landlord Panel research from BVA BDRC – in conjunction with Foundation Home Loans – HMO lettings and MUBs continue to generate significantly higher average rental yields when compared to other property types (6.0%).
The next largest yield generator in the report was suggested to be bungalows at 5.6% followed by semi-detached houses at 5.5% with individual flats, terraced houses and detached houses all coming in with a 5.3% yield. (slide 24).
Inevitably, landlords with HMOs continue to spend a higher proportion of gross rental income on upkeep vs. landlords with non-HMOs, although this figure dipped to 27% in Q2 compared with 29% in Q1 2023 and 28% in Q2 2022.
Within the latest research, there was also an increased focus on landlord divestment and it was interesting to note that terraced houses and individual flats were suggested to be the primary target for divestment. In contrast, HMOs, MUBs and bungalows were reported to be more protected. A factor which is likely linked to the stronger rental yields being achieved by these property types.
With landlords carefully considering their divestment strategies to minimise risk and bolster yields, it’s clear that HMOs are still proving to be an attractive longer-term proposition for portfolio landlords. And with the specialist BTL market generating the most competitive solutions for this product type, the intermediary market remains in prime position to help satisfy this growing demand.
If you would like to know more about our HMO offering, then why not speak to one of our specialist BTL team today.
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