Your Business and Industry
How landlords are embracing diverse property types.
While landlord borrowers’ initial forays into property investment tend to be residential specific, with traditional houses and flats being purchased, as time passes and landlord confidence grows, there is an understanding amongst landlords of what is achievable by diversifying their portfolio with various property types.
We see that in the business we write and the landlord borrowers we service, as they become aware of the need for further diversify to improve yield, grow profitability and mitigate any potential risk in their portfolios.
This is a clear strategy for many landlords, and it’s one that specialist lenders like ourselves can support. We provide flexibility regarding the specialist property types and what we are willing lend on and accept from a borrower point of view.
Many will look at Houses in Multiple Occupation (HMOs) and Multi Unit Freehold Blocks (MUFBs), which come in various guises and sizes. They will also look at the possible types of rentals and the required properties.
Specifically, student lets in university areas, holiday lets in those parts of the country which benefit from a large tourist population at various times of the year, and short-term lets where no AST is required.
There are a whole host of properties across the country which are seen as ‘hybrid’ – those with a mix of HMOs and MUFBs. As a lender, it’s essential that we accept these, not because there is double the property-type risk-mitigation, with the landlord active in two distinct parts of the rental market. However, in this case they are combined.
Semi-commercial combines the residential and commercial elements, such as a retail operation with residential flats above it. When we review lending on these, we look at the residential part of the property, which traditionally has been in excess of 60% of the total property in terms of rental income achievable and the overall valuation. However, in certain cases we can work on cases which flip this to 60% commercial 40% residential.
Additionally, our new Property Plus and HMO Plus products which allow us to consider both HMOs and a broader range of commercially adjacent premises, including flats above shops, locations near business units, investor-only areas, and those affected by postcode concentration rules.
Overall, we are seeing more landlord borrowers looking to expand their portfolios, and who also sense that now is the right time for a level of diversification to benefit from forays into more specialist property types, mainly to secure higher rental yields, tap into the growing tenant demand.
*This article was originally published on BTL Insider
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