Landlords ditching buy-to-let for HMOs

16th January 2017

Roma Finance is seeing a record number of buy-to-let landlords converting their properties into Houses in Multiple Occupation in order to increase rental income as tax increases start to bite.

Roma Finance funded more conversion cases of this type in 2016 than any previous year. The main reasons for the demand for bridging finance to convert buy to lets to HMOs are the potential increase in yield and the greater opportunity to rent more rooms in cities and towns with high populations of young professionals and students.

However Roma says that although HMOs are well known to offer the potential of higher rental yields, tenant turnover can be higher and be more labour-intensive than single buy-to-lets.

Scott Marshall, managing director at Roma Finance, commented: “Recent Government policy has put the spotlight on the buy to let market and landlords have acted quickly to mitigate any negative effects on their income. Many want to retain property but maximise income and we have worked with many landlords to fund conversions to HMOs. One landlord we worked with calculated that in one of their properties they could rent out five rooms, vastly increasing income and yield, for just a £30,000 conversion cost. The increased rental income would cover the cost of the loan over twelve months. In this case it made a lot of sense to carry out the conversion.

“Converting a single occupancy buy to let to HMO is one option for landlords and we have a number of cases already in the pipeline which will be funded in the coming weeks.”

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