More landlords are investing in HMOs as higher mortgage costs prompt them to turn to larger properties with better returns.

MFB reports that it has seen an increase in interest for HMOs while demand for student housing and house shares for young professionals continues to grow, creating a buoyant market in the right cities and towns.

Jeni Browne, of MFB, explains to LandlordZONE: “Higher mortgage costs are squeezing cashflow, meaning landlords are shifting their focus to higher-yielding assets, of which HMOs are a strong option.”

HMO mortgage of 80% LTV

MT Finance is the latest lender to offer an HMO mortgage of 80% LTV on its buy-to-let small HMO offering, available for its five-year fixed Tier 1 product.

It agrees that the HMO market is growing as investors seek higher yields and explains that with a maximum loan amount of £2million, this product offers significant flexibility for investors looking to expand their portfolios or refinance existing properties.

For landlords thinking about embarking on their first HMO purchase, it’s a great market to enter, says Browne.

Not only are the yields generally better than vanilla properties, but multiple rents from the same property mitigate the risk of rental voids.

“That said, you shouldn’t underestimate the challenges of this more complex property investment type,” she added.

“Licencing, regulation, and higher ongoing management mean landlords often find HMO management more labour-intensive than traditional vanilla properties. It’s essential you do your research before purchasing, especially to determine whether the area you’re considering has enough demand for HMOs.”