MUFBs and HMOs are Investments with Highest Yields

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Multi-unit freehold blocks (MUFBs) and houses in multiple occupation (HMOs) earn property investors the highest rental yields.

Property investors who manage portfolios with HMOs and MUFBs are currently gaining the highest rental yields, in spite of the recent decline in market averages that permeated the first quarter of the year.

The research, which came from Precise Mortgages, found that average rental yields for HMOs were the highest across all types of properties, standing at 7.1 per cent. This is 1.3 per cent above the market average. Yields gained from multi-unit freehold blocks were the second highest, at 6 per cent. This data demonstrates the opportunities available for landlords to refocus their portfolios, according to the study by BDRC Continental.

Across all property types average yields saw a slight decline in the first quarter of 2018 to 5.8 per cent, down from 5.9 per cent in the last quarter of 2017. Yields now stand at the same level as the first quarter of 2017. The highest average yields of 6.7 per cent were obtained from portfolios of between 11 and 19 properties, demonstrating the continued rise of professional landlords. In contrast, those with just one property achieved yields of 4.8 per cent.

On a regional basis, landlords who own portfolios in the North West reported the highest rental yields, standing at a sizeable 6.7 per cent. In stark contrast, Central London portfolios produced the lowest average yields, coming in at a mere 4.8 per cent.

Managing director of Precise Mortgages, Alan Cleary, spoke out about the survey findings: ‘As HMOs attract multiple tenancies, gross rental income tends to outstrip single lets and rental income is more secure even if one tenant leaves a void. Experienced landlords are looking to rebalance their portfolios and there is a real opportunity for brokers to support them to work with specialist lenders who are prepared to be flexible and have expertise across the widest product set.’