Landlords look to diversify

Of those brokers who had been approached by landlords about diversifying, 56% of enquiries were about diversifying into Houses with Multiple Occupants (HMOs). HMOs can generate a higher yield for landlords which will help to mitigate against the additional costs that they now face. Research found that the average yield of a HMO could be 3.3% higher than a property with one tenancy agreement. However, changes to HMO regulations following a government consultation, due to be implemented from October, could introduce additional regulation in this area.

Landlords are also increasingly diversifying into commercial and semi-commercial properties in the wake of the recent PRA regulations and the changes to tax treatments for buy-to-let properties. The research found 14% of brokers said they had been approached by landlords wanting to increase the level of commercial property within their portfolio. In addition, 9% reported that landlords wanted to diversify into mixed-use properties.

Unlike residential buy-to-let property, landlords holding only commercial property will not be affected by the reforms to mortgage tax relief. In addition, commercial or mixed-use properties will not incur the same amount of stamp duty as purely residential buy-to-let properties would.

In addition, brokers said landlords were looking to diversify into student accommodation. Brokers also pointed to other options, such as holiday lets and serviced accommodation, being brought up by clients.

Recent regulatory and tax changes are thought to be the driving force behind a growing number of landlords moving into new property markets.

If you would like to know more about buy-to-let mortgages, please do make contact and one of our qualified advisers will be happy to help.