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Demand for HMOs on the rise as portfolio landlords look to purchase

Landlords are planning to acquire Houses in Multiple Occupation (HMO) more than any other property type over the next 12 months, research from Paragon has found.

Paragon’s Q4 2019 PRS Trends report found that of the landlords planning to purchase property in the next 12 months, nearly a third (31%) plan to purchase HMOs, up from 12% just three months earlier.

This is the highest level since Q2 2017 and reflects a greater propensity for portfolio landlords to purchase. A quarter of landlords said they plan to acquire flats, with 18% targeting terraced housing.

The research revealed that 9% of portfolio landlords – those with four or more properties – plan to add to their portfolio over the next quarter, compared to just 1% of non-portfolio landlords.

HMOs are typically purchased by portfolio landlords as they offer a higher yield but are more complex to manage. Paragon research shows HMOs achieve a yield of 6.5%, compared to an average yield across all property types of 5.6%.

Richard Rowntree, director of mortgages at Paragon, said: “The private rented sector needs to grow to meet increasing levels of tenant demand and it’s clear that portfolio landlords will drive that growth.”

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