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Highest rental yields achieved by HMO and multi-unit landlords

Landlords with portfolios comprising houses in multiple occupation (HMOs) and multi-unit freehold blocks (MUFB) are achieving the highest rental yields, new research for Precise Mortgages revealed.

HMOs saw the highest average rental yields across all property types at 7.1% – 1.3% above the market average. The study, conducted by BDRC Continental, recorded average yields for MUFBs as the second highest at 6%.

This comes despite averages dipping slightly from 5.9% in Q4 2017 to 5.8% in the first quarter of 2018, which are now at the same level as Q1 2017. Portfolios of between 11 and 19 properties achieved the highest average yields of 6.7%, while those with just one property achieved yields of 4.8%.

On a regional basis, landlords with portfolios in the North West saw the highest rental yields at 6.7%, compared with Central London portfolios with the lowest average yields of 4.8%.

Alan Cleary, managing director of Precise Mortgages, said: “As HMOs attract multiple tenancies, gross rental income tends to outstrip single lets and rental income is more secure even if one tenant leaves a void.”

“Experienced landlords are looking to rebalance their portfolios and there is a real opportunity for brokers to support them to work with specialist lenders who are prepared to be flexible and have expertise across the widest product set.”

Launched more than two years ago, Precise Mortgages’ HMO product range includes two-year tracker rates from 2.75% and two-year fixed rates from 3.09% as well as lifetime trackers from 3.50% and five-year fixed rates assessed on pay rate from 3.69%.

The portfolio lending limit has risen to £10 million with a maximum of 20 properties with Precise Mortgages and unlimited with other lenders.

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