Buy-to-let landlords are increasingly favouring Houses in Multiple Occupation (HMO) and more complex property types due to the often higher yields available.
Precise Mortgages reports that just over a fifth - 21% of landlords - are currently considering purchasing an HMO, owed in part to the high yields achievable.
According to the research undertaken by the lender, more than a third, 40%, of landlords plan to sell terraced houses in the year ahead, while just 8% of landlords intend to offload HMOs.
HMOs are highly attractive to investors, especially in UK cities with a high population of students and young professionals.
Whilst the market conditions in many areas are becoming more developed and competitive, a HMO property with the correct scheme and management can deliver landlords and investors higher rental yields, when compared with a standard single let rental property.
Figures provided by Precise Mortgages reveal that HMOs saw the greatest average rental yields in Q2 at 6.3%, compared to the market average of 5.5%.
Alan Cleary, managing director at Precise Mortgages, commented: “In a time of market uncertainty, HMOs are 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.
“The expansion of the HMO sector underlines how experienced landlords are rebalancing their portfolios.
“It also demonstrates the opportunity for brokers to work with specialist lenders who have expertise across the widest product set to support clients who are reassessing their portfolios.”