Recent research discovered that in the last six months more than half (51%) of mortgage brokers have had enquiries from landlords who want loans to diversifytheir property portfolios.
Around 56% of these loan enquiries were for houses of multiple occupancy (HMOs). This is because the average rental yields for HMOs are 3.3% higher than properties with one tenant. There is an increasing student population who want to live in HMOs, and student numbers are due to rise in the next academic year.
The research also found that 14% of brokers have been approached by landlords who want to invest in commercial and semi-commercial property. Some want to sell all their residential properties and focus solely on commercial property. Commercial property is unaffected by the reduction of commercial mortgage tax relief that has affected buy to let mortgage holders. Commercial properties are not subject to the increased 3% stamp duty that is paid on private residences.
Recent legislation has meant that buy to let landlords pay a 3% stamp duty and extra tax. Unless landlords can charge higher rents, these changes mean their rental yields have been reduced. This is why they need to diversify by buying HMO or non-residential property in order to increase rental yields.
There are many specialist lenders who provide finance for commercial, semi-commercial and other niche properties. Brokers help landlords find the best commercial mortgage deals to enable them to purchase property that can provide greater rental yields.