Latest data from research via BVA BDRC landlord survey for Q3, July – September, 2020 shows that HMO properties outrank all other property types by quite some way, delivering a rental yield of 6.9%compared to the average 5.7% for other property types.
Even in the current unpredictable COVID climate, it’s not unreasonable to imagine that multi-tenant living may be required even more in the future, given the predicted changes to demographics and the fact that housing supply levels are not meeting demand and are unlikely to do so well into the future.
The survey data also showed that landlords who are letting to students and the retired are able to reach the highest rental yields, at an average of 6.6%.Local Housing Authority lets generate a return of 6.5%, which is well above the average.
Of course, the purchase of an HMO is a significant step for a landlord who is new to property letting; it comes with a higher level of responsibilities and licencing requirements and as their mortgage advisor, it’s prudent to ensure that you remind them of this as they embark on their portfolio diversification in this way.
Landlord respondents said that it’s the HMOs that cost a great deal to upkeep and maintain, taking back typically 23% of their own gross rental income. As well as this, utilities and council tax tend to cost much more on HMOs, which are more likely to come out of the inclusive rental income in this sort of shared accommodation.
However, it’s clear that landlords who are looking to increase their average yield are now keenly investigating this sector so it is worth familiarising yourself with the mortgage and ownership technicalities so that you can help them secure the right finance option to suit individual needs.
Contact us today to find out how we can help you remain at the forefront of landlord business needs in 2021.