Research by Precise Mortgages discovered more than a fifth of landlords who were planning to buy wanted to add HMOs to their portfolio in the next year.
According to Precise, these types of rental properties – commonly used for student accommodation – achieved the highest average rental yields of 6.3% compared to the market average of 5.5%.
At a time when average yields across the whole market were at their lowest for nine years, it’s no wonder HMOs are proving so appealing. Indeed average yields for all property types fell by 0.3% between April and June this year and are now at their lowest level since 2010.
Alan Cleary, managing director of Precise Mortgages, explained in a time of market uncertainty, HMOs were an attractive option for professional landlords looking to maximise yields.
“As HMOs attract multiple tenancies, gross rental income tends to outstrip single lets meaning the rental income is more secure if one tenant leaves a void,” he explained.
“The expansion of the HMO sector underlines how experienced landlords are re-balancing their portfolios.”
Popular properties
Precise also discovered terraced houses were the most popular type of property, with 50% of landlords planning to buy this type of home. However, it also found 40% of landlords planned to sell terraced houses in the year ahead while just 8% of landlords holding HMOs in their portfolios were going to sell them.
Blocks of flats were set to increase in popularity amongst landlords, with 8% planning to add these to their portfolio compared to 5% who were ditching this type.
What’s more, landlords with 11 or more properties tended to have more diversity in their portfolios, owning three different property types.
Its survey also found landlords with between 11 and 19 properties were earning the highest average yields at 5.9%.
When it came to location, the North West was the best area for yields with landlords earning an average of 5.9 in this location
