Buy-to-let landlords are more frequently looking to purchase Houses in Multiple Occupation (HMOs) , due to the greater rental yields that they offer, according to a new report.
The investigation by Mortgages for Business also shows that 28% of landlords questioned are thinking of purchasing a HMO. This is a rise of 10% from one year ago.
HMOs interest rising
In addition, the firm shows that the proportion of investors searching for vanilla property-conventional houses and flats which fall within traditional buy-to-let criteria-has slipped from 83% to 79% in the last six months.
What’s more, the introduction of the additional stamp duty surcharge during April has also had an impact on the number of landlords looking to add to their existing portfolios.
November 2015 saw 46% of landlords questioned express an interest in purchasing additional properties. However, by last month, this figure had fallen to 41%.
However, the number of landlords looking to sell their properties has dropped, from 18% six months ago to 14% during May.
Interest in HMOs grows amongst landlords
Incorporation
With restrictions on buy-to-let mortgage interest tax relief for higher rate taxpayers coming in next year, more residential landlords have been exploring the possibility of incorporating their portfolios in private limited companies.
Last month, 30% of landlords surveyed said that they owned a property within a limited company, up from 22% at the same period last year.
David Whittaker, managing director of Mortgages for Business, ‘with higher yields it is no surprise that there has been a sizeable shift towards the more complex property types.’[1]
Commercial interest
Mr Whittaker also said that there has been increased interest in commercial and semi-commercial property, with these assets not incurring the 3% stamp duty charge.
‘It is positive to see that fewer landlords are looking to sell property and shrink their portfolios and that a large proportion are still seeing the benefits of remortgaging. After the government’s tax crackdown on private landlords I can understand why investors are being more cautious about expansion. It will be interesting to see how long this cautious approach will last,’ he stated.[1]
[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/6/landlords-favouring-hmos-to-benefit-from-higher-yields