Which tenant profiles achieve the highest rental yields?
One area of the market showing sustained popularity into 2021 is the HMO market which is largely being driven by landlord’s ability to generate stronger yields. This was highlighted in the recent Q4 2020 landlord panel research from BVA BDRC which outlined that HMO lettings continue to generate significantly higher average rental yields when compared to other property types (7.0%).
In terms of the HMO tenant profile, landlords letting to migrant workers and LHA claimants were suggested to achieve the highest rental yields, at an average of 7.1% and 7.0% respectively, with Universal Credit lets also achieving a typical yield well above average (6.7%).
The cost of running an HMO
Focusing on costs, landlords running and maintaining HMOs were suggested to typically spend around 25% of their gross rental income, compared to an average of 21% which is spent running non-HMO properties. Both estimated spend %’s have edged down slightly year-on-year from 28% and 24% respectively.
All of which means that mortgage intermediaries operating in the buy to let space are likely to see continued demand for HMO lending. This does come with an additional layer of complexity, which underlines how important it is for landlords to deal with specialist advisers and for advisers to work with lenders who can assess cases on an individual basis and find a successful pathway through the complications.
So, if you’re looking to help more of your BTL clients to explore a wider range of HMO options, then why not speak to our team to get to know our offering and how we can support their ever-changing needs.
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