A multiple unit on a single title, also known as a multi-unit freehold block, is typically (but not always) one building with multiple tenants. They are normally small blocks of flats or a big converted house but you will sometimes see a cluster or terrace of houses on a single title.
Multiple units on a single title must be self-contained and subject to individual tenancy agreements. If there are shared facilities the property is likely to be classed as a house in multiple occupation (HMO) such as a student houseshare or flatshare.
What’s the attraction?
As with HMOs, it’s the yield that appeals to savvy landlords. Many are increasingly on the lookout for stronger cashflow as they grapple with rising stress tests and adverse tax treatment.
According to data from Mortgages for Business, the average yield on multi-unit freehold blocks was 7.9% in the second quarter of 2017, significantly higher than vanilla buy-to-let.
Multiple units mean multiple streams of income, which helps with diversification and reduces the risk of severe cashflow disruption. It is also an economic and efficient alternative to owning several smaller stand-alone properties.
Additionally, a landlord may choose to boost the capital value of their investment by acquiring it and then creating a structure with each unit enjoying its own leasehold title. Some or all of the units can then be sold off to owner occupiers or landlords because the properties now qualify for conventional mortgage products.
Place the case
This may be classed as complex buy-to-let, but it certainly isn’t business you want to miss.
Multiple units on a single title usually have a significant value. Average property values in the second quarter of this year were £742,836, with loan sizes of £441,065, according to Mortgages for Business. So, this is valuable business which is worth the effort.
Some buy-to-let lenders will accept multi-unit cases but often with restrictions. Some won’t lend on new build properties, for example, while others apply tighter rental calculations or restrict their exposure in one building to a proportion of units.
Landlords investing in multi-units often also want to carry out some light refurbishment or development and this can add further complexity.
There is a handful of buy-to-let specialist lenders with detailed knowledge of this sub-sector. As a broker, knowing which lenders really understand this complex area of the rental sector allows you to deliver a robust solution to your client, confident in the knowledge that the lender won’t let you down.