Growing numbers of landlords are converting their rental properties into Houses in Multiple Occupation (HMOs) in order to optimise rental income in the face of government induced tax increases.
Roma finance has reported that they have recorded record numbers of conversions of this type during 2016. The main influences behind such a decision tend to be the promise of a growth in yield, coming from the opportunity to rent out rooms in cities and towns with a demographic leaning towards students and young professionals.
Scott Marshall, managing director at Roma Finance described one case in which a landlord worked out that they could let five separate rooms from their property, offering a vast increase in rent with a comparatively low conversion cost of just £30,000. The higher rental income would repay the cost of the loan over just one year.
However, despite the premise of financial benefits, Roma urges caution to landlords considering converting, as the management of a HMO can be more strenuous than that of a standard rental property, with a higher tenant turnover.
Marshall 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.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.’