More than a fifth of landlords (21 per cent) who are planning to buy over the next year are looking to add Houses of Multiple Occupation (HMOs) to their portfolios, Precise Mortgages has revealed.

HMOs are proving to be an attractive proposition in a time of market uncertainty, with HMO landlords achieving the highest average rental yields at 6.3 per cent.

Alan Cleary, managing director of Precise Mortgages, said: “In a time of market uncertainty, HMOs are an attractive option for professional landlords looking to maximise yields.

“As HMOs attract multiple tenancies, gross rental income tends to outstrip single lets meaning the rental income is more secure if one tenant leaves a void.

“The expansion of the HMO sector underlines how experienced landlords are re-balancing their portfolios.

“It also demonstrates the opportunity for brokers to work with specialist lenders who have expertise across the widest product set to support clients who are reassessing their portfolios.”

Average yields for all property types dropped 0.3 per cent in Q2 and are now at their lowest level since 2010.

The most popular type of property to buy is terraced houses, with half of landlords planning to buy a terraced property.

Cleary added: “To help landlords explore new opportunities, we’ve extended our top slicing feature across our entire buy-to-let range.

“It means landlords can now use their surplus HMO income for future property purchases to expand their portfolios.

“We also offer refurbishment buy-to-let for works being completed under permitted development rights, provided there are no structural alterations or changes to the footprint of the property.

“This is a really exciting development as it allows landlords to change the use of a property from a C3 dwelling house to a C4 HMO of up to six bedrooms.”

“We know from our own research that landlords are investing differently, and HMOs are one direction they’re taking, ” adds Richard Truman, Head of Operations at Simple Landlords Insurance. “We also know that it’s an investment that needs a lot of research.

“The yields are only that high if you’ve got full occupancy, full time, and with a higher turnover of tenants than ordinary property that can take a lot of work. The first step is to make sure the area you’re looking at can support more HMOs, and that there’s the demand from your target tenant audience – whether that’s young professionals or students.”