THE PROPERTY EXPERT

MANY HAPPY RETURNS, BUY-TO-LET!

interesting ar ticle in the recently covered which types of proper ty give the biggest returns, and revealed that the controversial – but lucrative – tactic of dividing up family homes into bedsits or ‘houses of multiple occupation’ (HMO) is no longer the biggest earner in buy-to-let.

The so-called ‘multi-unit freehold blocks’ which involve buying a block of flats or a conver ting a building into apar tments, earned investors 9.3% in gross rental yields between and December 2014. By contrast, HMOs earned 9% in the same period; not a large difference it must be said.

These yield figures – based on thousands of transactions made since 2011 through leading buy-to-let broker Mor tgages for Business – are ‘gross’.That means they don’t take into account costs such as ser vicing a mor tgage, maintenance, ground rent, or add-ons such as letting agent fees and income tax.

Investing in blocks of flats isn’t exactly cheap, with prices star ting at around £500k for an eight-apar tment building in a city outside London and £4m for the same size building in central London.

However, the average buyer’s budget for a block of flats has fallen in recent years. In early 2011 the average proper ty price was £932,148 with a 44% deposit, now investors pay £497,644 on average with a 36% deposit.

Dividing up proper ties for multiple occupants, where tenants share a living space but hold separate rental agreements, yields 1.4% lower than at the same point last year.

Multi-unit flats are lucrative becaus of the ‘economies of scale’ and therefore may only benefit high value investors.

Exper ts say that HMO will continu strong performance, and that rental yields are higher than more traditiona buy-to-lets, but returns have slipped over the past year. However, it remain popular with high demand from tenants and for the year ahead buy-to-let investors are confident tha HMOs will produce the best income

you be considering buy-to-let – or moving, letting or renting – pop in to see us for an informal chat and a warm welcome.