HMO Investment Growing Despite Regulation

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Research made by Precise Mortgages reports HMO landlords are currently having the highest rental yields in the market at 6.3%. It compares to the overall average rental yield of 5.5% for private landlords.

The popularity of HMO investment stays strong in the face of increased regulation and penalties in the shape of section 24 mortgage interest relief restrictions with supply into the market set to grow in the next year. The evidence being quoted 21% of landlords say they are planning to buy an HMO property in the next 12 months and only 8% want to sell their HMO property.

Managing Director at Precise Mortgages, Alan Cleary, said:

“It was initially feared the new legislation, which the government estimated would affect around 160,000 properties, could put the brakes on what has become an increasingly popular area of the market in recent years. Some thought the cost of the work needed to convert properties to obtain a licence or the loss of income from rooms that were now too small under the new rules could put new investors off or persuade existing HMO landlords to exit the market.

“However, it appears those fears were unfounded. Not surprisingly, landlords looking to rebalance their portfolios after years of being buffeted by the storms from the regulatory and tax changes are still tempted by the attractive rental yields potentially on offer. Many landlords are also attracted by the peace of mind that comes with knowing that rental income is more secure, even if one tenant leaves a void.”

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“We’ve recently extended our top-slicing feature across our entire buy to let range to include HMO customers. It means landlords can now use their surplus earned income or portfolio income to demonstrate they could meet any financial stresses on their new property, rather than through the rental income of the property alone. We now also offer Refurbishment Buy to Let for works being completed under permitted development rights, provided there are no structural alterations or changes to the footprint of the property. This is a really exciting development as it allows landlords to change the use of a property from a C3 dwelling house to a C4 HMO for up to six bedrooms.

“So as some doors shut in certain areas of the market, different ones are opening up, particularly for those investors who are prepared to step over the threshold and explore the new opportunities on offer.”

Precise Mortgages HMO range highlights:

  • 2 year Fixed rates from 2.79%
  • 5 year Fixed rates from 2.99%
  • Top slicing available across the entire Buy to Let range, including portfolios (not available to first time buyers)
  • Minimum loan size reduced to £40,000
  • Multi Unit: Properties accepted on Tier 1 products to a maximum of 75% LTV

To see the list of HMO Mortgage Lenders visit our Directory.


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