HMOs prioritised as landlords look to diversify

  • 17/04/2018
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HMOs prioritised as landlords look to diversify
Landlords are keen to diversify their property portfolios and houses in multiple occupation (HMOs) are the proving to be most attractive sector, research has found.

According to a study commissioned by One Savings Bank, half of the brokers surveyed had been approached within the last six months by landlords looking to invest in a wider range of properties.

The most popular target were HMOs, with advisers reporting 56% of diversifying enquiries were about this sector.

The interest in HMOs is understandable as yields are typically larger for these properties – potentially as much as 3.3% higher than a property with one tenancy.

However, One Savings Bank noted that changes to HMO regulations due to be implemented in October could introduce additional burdens in this area.


Commercial outlook

The survey of 205 brokers was conducted by AE3Media, publisher of Mortgage Solutions, on behalf of One Savings Bank.

It also found that landlords were seeking to diversify into commercial and semi-commercial properties in the wake of the Prudential Regulation Authority (PRA) and buy-to-let tax changes.

One in four brokers had been contacted by landlords wanting to increase the level of commercial property (14%) or mixed-use property (9%) within their portfolio.

Unlike residential buy-to-let property, landlords holding only commercial property will not be affected by the reforms to mortgage tax relief.

In addition, commercial or mixed-use properties will not incur the same amount of stamp duty as purely residential buy-to-let properties would.

And 6% of brokers said landlords were looking to diversify into student accommodation.


Hunt for yields

OneSavings Bank sales director Adrian Moloney said: “Landlords are on the hunt for greater yields, and, in the face of regulatory and tax changes, diversifying into commercial property or more complex residential options such as HMOs can offer this.

“With the buy-to-let market becoming increasingly complex, there is an opportunity for informed brokers to support landlords seeking new niches.

“However, these brokers must in turn be supported by specialist lenders who can offer the flexible lending needed to finance the growth of these segments of the market,” he added.

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