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Categories: property market | hmo

In the current property market landscape, Houses in Multiple Occupation (HMOs) are seeing increasing interest from landlords. This has been driven by investors looking for strong rental yields that will remain profitable during a changing economy.

Recent data from specialist lender Shawbrook highlighted the increased interest in HMOs, within the buy to let sector, indicating a notable shift in overall landlord strategy.

Over the past few years, HMOs have steadily gained traction, with their share of Shawbrook’s buy to let business climbing from 27 percent in both 2022 and 2023, to a significant 34 percent in 2024.

This increase underscores a shift in landlord behaviour, driven by a desire to diversify portfolios and capitalise on the unique advantages offered by HMO investments.

Daryl Norkett, director of real estate proposition at Shawbrook, attributes this surge in HMO popularity to several factors:

As landlords have dealt with years of challenges stemming from the pandemic and culminating in the past couple of years of economic uncertainty, HMOs have proven to be a sound strategy for landlords looking to diversify their portfolios, as well as strong option for non-portfolio landlords entering the market.

HMO rental yields are more easily able to afford mortgage lending in a higher interest rate environment, and the regular turnover of tenants allows landlords to stay on track with market rents.

The option to reconfigure properties and the ability to turn lower yielding single lets into higher yielding HMOs has clearly been a strong draw over the past year or so, as landlords adjust their businesses to succeed in a tougher economic environment.

According to LandlordZONE, for HMO investments, the average four-bed HMO commands a monthly rent of £593 per room, translating to £2,372 per month for four occupants.

With an average yield of 8.1 percent, significantly higher than the 4.4 percent generated by standard rental properties, HMOs offer great returns for investors.

As landlords navigate the modern property market, HMOs are proving increasingly popular as part of a resilient investment strategy.

Professional landlords set to invest

In another survey, of over 500 residential landlords that Shawbrook recently conducted, findings showed that 25 percent were looking to expand their portfolio within the year. What’s more, 22 percent said they would be making several purchases.

37 percent of respondents said they would be investing in new property types and 39 percent would be investing in new locations.

Overall, 88% of portfolio landlords have increased the size of their portfolios in just the last six months, showing that there is a keen determination to maintain and expand.

Get specialist help finding competitive HMO mortgage rates

Commercial Trust offers expert advice on HMO mortgages.

With over 80 lenders nationally, not only will your advisor identify the best HMO mortgage rate for you to meet your needs and circumstances, but your personal account manager will see your application through to completion.

If you are purchasing or remortgaging within the next three to six months, get in contact by phoning us or submitting an enquiry through our website.