HMOs noted as best buy-to-let investment option

Landlords better-placed to combat interest rate rises, analysis suggests

HMOs noted as best buy-to-let investment option

Houses in Multiple Occupation (HMOs) have been outlined as the most profitable and stable buy-to-let (BTL) investment option. A report from Platinum Property Partners (PPP) has suggested that HMOs, generally rented to young professionals and key workers, can generate rental income that is up to four times higher than that achieved in a standard buy-to-let property, as each room can be let on an individual basis.

Investors with HMOs are also better placed than other landlords to combat any financial damage caused by future interest rate rises. PPP has noted that the profitability of a standard buy-to-let investment could be wiped out by a three percent rise in interest rates next year, assuming mortgage rates increase by the same amount. This is because, typically, gross rental income is not sufficient to cope with higher mortgage interest repayments, the specialist explained.

PPP founder and chairman Steve Bolton said: “In recent years, there has been an influx of investors to the BTL market, with bricks and mortar proving to generate returns that outperform all other asset classes. However, not all BTL is equal, and our data shows that HMO’s generate much higher rental income than standard BTL properties.” He added: “With many changes on the horizon for landlords, including the proposed restrictions to mortgage tax relief and looming interest rate rises, it’s never been more crucial to have a decent cushion of rental income to absorb any rising costs.”

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