Landlords looking to HMOs over next 12 months

Landlords are intending to acquire Houses in Multiple Occupation (HMO) more than any other property type over the next 12 months, according to new research by Paragon.

Paragon’s Q4 2019 PRS Trends report found that of the landlords planning to purchase property over the next 12 months, 31% are planning to purchase HMOs, a rise of 12% from just three months earlier.

The research revealed that this is the highest level since the second quarter in 2017, and reflects a greater tendency for portfolio landlords to purchase. A quarter of landlords suggested they are planning to acquire flats – with 18% targeting terraced housing.

Paragon also reported that 9% of portfolio landlords – those with four or more properties – plan to add to their portfolio over the next quarter, compared to just 1% of non-portfolio landlords.

HMOs are typically purchased by portfolio landlords, according to Paragon, as they offer a higher yield, but are more complex to manage. The research found that HMOs achieve a yield of 6.5%, compared to an average yield across all property types of 5.6%.

Paragon director of mortgages, Richard Rowntree, commented: “The private rented sector needs to grow to meet increasing levels of tenant demand and it’s clear that portfolio landlords will drive that growth. Not only are they looking to build their portfolios, they are also looking at more complex types of property that will deliver higher yields, such as HMOs.”

“Although still fragile, hopefully we are starting to see some green shoots with regards to landlord confidence. Landlords have encountered significant regulatory and fiscal changes in recent years and we hope to now enter a more settled period.”

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