Aspiring portfolio landlords are increasingly targeting higher yielding multi-unit blocks (MUB) and HMOs rather than traditional flats and semis.

MUBs are buildings or houses split into separate accommodation units but that don't feature shared facilities, unlike an HMO.

A Paragon Bank survey of 500 landlords who have three or fewer rental properties but with ambitions to build a portfolio, reveals that only 8% currently invest in HMOs - but that rises to 17% when thinking about future property acquisitions. Similarly, 14% of landlords currently invest in MUBs but 26% would like to do so.

There is also a large jump in the number targeting terraced housing - the staple of the rental market - rising from 26% to 37% in future. Other properties that landlords expect to buy include detached homes (36% own them compared with 40% who intend to buy in future) and bungalows (11% own them today and 24% plan to in the future).

Traditional homes

Conversely, flats and semi-detached houses recorded a slight fall, with 42% of landlords currently owning flats and 42% intending to buy in the future, with plans for semi-detached homes dropping from 36% to 34%.

Russell Anderson (pictured), Paragon Bank’s mortgages commercial director, says the majority of landlords start building their portfolios with more simple buy-to-let propositions, such as self-contained flats or terraced houses which continue to be the staple of the private rented sector.

“However, as they build experience and, for many, letting becomes a business, we see portfolio landlords typically moving into more complex buy-to-let through higher yielding HMOs and MUBs,” he adds. “With the demand for rented property significantly outweighing supply, the need for HMO style property is growing and we expect this to be a strong market segment for years to come.”