Landlords are increasingly turning to this specialist area, according to the mortgage lender, because of its attractive returns which are averaging at 6.9% compared to 5.8%, which is the typical rate across all other property types.
HMOs are dwellings in which at least three tenants live and where there is more than one ‘household’. They usually have shared toilets, bathrooms or kitchen facilities. Homes with five or more tenants, which also form more than one household, are classed as ‘large’ HMOs.
It is an area of the private rented sector which is most common in university towns and many HMO landlords offer student accommodation. But it appears to be a sector which is becoming more popular.
Indeed, Leeds launched a bespoke range of mortgages tailored to small and large HMOs earlier this year to meet the needs of landlords who were diversifying their portfolios and moving into this area.
Matt Bartle, director of products at Leeds said: “The research confirms the importance of HMOs for landlords looking for higher rental yields. Increasingly, landlords are turning to this specialist area, which is a well-established part of the private rented sector, particularly in university towns and urban areas with higher housing costs.
“HMOs form a part of a healthy housing market and we used our extensive buy-to-let experience to develop our unique proposition. In addition to the bespoke products and specialist valuations we offer, we’ve enhanced our lending criteria to align with planning and licensing requirements for both small and large HMOs.”
It’s not just HMOs which can offer attractive returns to landlords. The study by Leeds also found multi-unit blocks of flats offered an average yield of 6.3% and semi-detached homes were also above average, offering returns of 6.1%.
