Where are the best yields for landlords who consider houses in multiple occupation as part of their real estate portfolio? Hiten Ganatra takes a look and provides insight into a number of emerging changes in this market
A recent report Published by Property Management and Financial Platform Lendlord gave detailed insights into the houses in the Market for Multiple Occupation (HMO) for Q4 2024.
The data showed that the northeast easily offers the highest average yield at 15.4% with Wales with 11.4%, East Anglia at 11.2% and Yorkshire and Humberside at 10.8%.
However, the southeast at 10.6% also shows that the yields of more than 10% are possible in areas with higher than average real estate prices.
The report also showed that Greater London dominated the HMO market, accounting for 20.6% of all analyzed HMOs, while regions such as the West Midlands (11.8% market share) and the North West (15.1% market share) played an important role in the HMO landscape.
Not far ahead and looming on the horizon, however, is the reform of the tenant rights that proposes a number of important changes that will influence rental homes, including houses in multiple occupation (HMOs).
Here is an overview …
1. Abolition of fixed term lease contracts
The bill aims to eliminate the insured person on the fixed period and to transfer all lease contracts to periodic agreements. This change is intended to provide tenants greater flexibility and safety, so that they can terminate their lease with a notice period of two months.
2. Improved land for property
While the bill is abolishing Section 21 ‘no-fault’ expansions, it introduces refined and extensive land for possession under section 8. Landlords can regain possession for specific reasons, such as planning to sell the property or close family members close to.
However, tenants are protected during the first 12 months rent of the deportation based on these grounds.
3. Rent increases regulations
The bill suggests that the rent increases are limited once a year, with landlords needed to offer a two -month notice period before they implement an increase. This measure is intended to offer tenants more predictability and protection against sudden rental increases.
4. Decent housing stand
The introduction of the decent home standard to the private rented sector mandes that all rental homes, including HMOs, meet specific criteria to ensure that they are safe, are in good repair and free of serious dangers.
5. Prohibition of discriminatory practices
The bill makes it illegal for landlords and agents to discriminate against tenants based on their receipt of benefits or if they have children. This ensures a fairer rental market and equal access to housing for all potential tenants.
These proposed changes are aimed at improving the security of tenants and standardizing practices within the private rented sector, which directly affect the management and operation of HMOs.
Despite these increased regulations around landlords and renting property, plus higher interest rates, making both margins tight for some real estate investors or leaving some not able to meet the affordability requirements of lenders – there are undoubtedly many opportunities available for smart investors and Hmos.
Whether you are trying to buy an existing HMO or convert properties that you hold in HMOs by using the short-term/bridging to find such conversions (allowing an HMO license of the local authority of the local authority
COURSE) – This latest set of data makes it clear that HMOs still offer investors excellent yields.
Hiten Ganatra
With more than 20 years of experience in helping landlords to maximize their investment options using different financial options, we see many customers diversify and for many this includes HMOs in their portfolios.
From these last figures it is clear why this is a trend that I don’t see changing quickly.
Hiten Ganatra is director of Visionary financing