This estate agency in Leeds has seen an increase in demand for HMO investments and mortgage applications

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Private Rentals and HMOs – A Glimpse Through Time

Over the past few years, the UK private rental and HMO – multi-occupancy houses – sectors have boomed. The main reason for this is the affordability problem linked to rising property prices, which contrasts sharply with the underperformance of wage growth.

For most people who are not in the loft of ownership, leasing and HMO are the only viable options. However, one school of thought also suggests a growing indifference and apathy towards property/property among the 21-35 age bracket, especially in the UK capital.

In 2018, even before Covid hit, the government estimated that around 4.7 million people were in the private rental sector in England alone and around 497,000 HMOs in England and Wales. The situation is further inflated after Covid-19 partially halted wage and employment growth.

How did HMO’s in Leeds become the next ‘golden nugget’ for investors?

The recent demand for HMOs in Leeds has caused a stir in the local market. The Yorkshire capital was one of the pioneers of HMO investment due to its large student population. In addition, Leeds has experienced capital growth of 8.6% over the past five years and has consistently ranked at the top for affordability and high standard of living, as well as prices for rented terraced houses.

According to local property experts, Dwell, Leeds has become the next “golden opportunity” for investors. Jon – Dwell Director says: “The spikes we saw in HMO investments and mortgage applications were pretty incredible. The most sought after areas for HMOs in Leeds are still Headingley and Horsforth, followed by Hyde Park and Woodhouse.

HMO Rental Yields and Tenant Management

The rental market has never been more competitive, with HMOs offering higher returns than standard buy-to-lets. As a result, many multi-tenancy properties offer great gross investment opportunity (especially if you know what you’re doing). However, managing tenants can be difficult because HMOs require a certain level of expertise in other areas, such as legality. Dwell offers a fantastic 360 degree solution allowing owners to realize the full potential of their investment.

Coping with the housing shortage

The government realized that there was a chronic shortage of housing; therefore, they set out to build 345,000 new houses per year in order to solve this problem.

The specified objective was never achieved and is unlikely to be achieved. However, local authorities and investors recognize an essential growing need for PRS and HMO housing as municipalities have lost most of their housing portfolios and are now dependent on private landlords.

HMO licenses

It becomes necessary for licensed HMOs to comply with strict regulations to ensure that housing meets minimum safety and quality standards, thereby improving the quality of the rental housing stock. Dwell-Leeds can see that what is happening in Leeds is that the changing reputation and interest in HMOs for tenants, along with the increased potential gains for investors, means that this growing sector will continue its huge boom and will develop further. But, at the same time, there remains a shortage of affordable properties for first-time buyers.

What’s wrong with HMO mortgages?

The idea of ​​an HMO mortgage is to make it easier for landlords to rent out their property, as this type of loan explicitly caters to people with multiple tenants from different households.

Sounds like the perfect mortgage for homeowners! For those who want a low interest rate and flexibility, an HMO linked to the Bank of England base rate would be exactly what you need. The maximum LTV ratio on these types is usually between 60% and 70%. Also, there are no additional costs.

Conclusion

HMOs are not without risk, but they are worth it, especially if you are guided by real estate experts such as Dwell-Leeds.
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