A survey of 500 landlords carried out by Paragon Bank has found that landlords with three or fewer buy-to-lets are eyeing houses in multiple occupation (HMO) and multi-unit blocks (MUB) as a means to expand.
Complex opportunities
Only 8% of the landlords surveyed currently invest in HMOs but that rose to 17% when they were asked about their plans for future property acquisitions.
Similarly, 14% of landlords invest in MUBs currently but that is expected to grow to 26%.
The findings are included in Paragon’s Next Generation Landlord Report, which examines who these landlords are and their aspirations.
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Terraced attracts attention
Landlords also expressed a desire to invest in more terraced housing, the staple of the rental market, rising from 26% currently to 37% in future.
The value of terraced homes has experienced the biggest percentage rise, increasing 3.5% according to Nationwide’s latest house price index; outstripping all other property types.
Other properties landlords expect to buy in the future include detached homes and bungalows.
Conversely, flats and semi-detached houses recorded a slight fall, with 42% of this cohort of landlord currently owning flats and 42% intending to buy in the future, with semi-detached homes dropping from 36% to 34%.
Chasing higher yields
Russell Anderson, Paragon Bank mortgages commercial director, said: “The majority of landlords start building their portfolios with more simple buy-to-let propositions, such as self-contained flats or terraced houses. These properties have been the staple of the private rented sector for many years and will continue to be.
“However, as they build experience and, for many, letting becomes a business, we see portfolio landlords typically moving into more complex buy-to-let through higher yielding HMOs and MUBs. With the demand for rented property significantly outweighing supply, the need for HMO style property is growing and we expect this to be a strong market segment for years to come.”
