A growing number of buy-to-let landlords are looking to boost rental profits to help cope with pending tax hikes by converting their properties into Houses in Multiple Occupation (HMO), according to Roma Finance.

The specialist bridging finance lender reports that it funded more conversion cases of this type in 2016 than any previous year.

The main reasons for the demand for bridging finance to convert buy-to-lets to HMOs are the potential increase in yield and the greater opportunity to rent more rooms in cities and towns with high populations of young professionals and students.

Despite the need for bridging finance to carry out the conversion and the cost of licensing, buy-to-let landlords are looking to the long-term by retaining property with a view to increasing rents, although the fact that tenant turnover can be higher and more labour-intensive than single buy-to-lets does need to be taken into consideration.

Scott Marshall, managing director at Roma Finance, commented: “Recent government policy has put the spotlight on the buy-to-let market and landlords have acted quickly to mitigate any negative effects on their income.

“Many want to retain property but maximise income and we have worked with many landlords to fund conversions to HMOs.

“One landlord we worked with calculated that in one of their properties they could rent out five rooms, vastly increasing income and yield, for just a £30,000 conversion cost. The increased rental income would cover the cost of the loan over twelve months. In this case it made a lot of sense to carry out the conversion.

“Converting a single occupancy buy-to-let to HMO is one option for landlords and we have a number of cases already in the pipeline which will be funded in the coming weeks.”