HMO landlords currently make gross monthly profits of £2,565 compared to £292 with standard buy-to-lets with the help of £3,298 of monthly income compared to £754.
If interest rates rose to 3% - and that was passed on to the cost of mortgage payments – HMO landlords would still make £2,139 per month while standard landlords would make a loss of £55.
Steve Bolton, founder and chairman of Platinum Property Partners, said: “Not all BTL is equal, and our data shows that HMOs generate much higher rental income than standard BTL properties. HMOs will therefore be an attractive option for investors looking for a lower risk strategy that achieves a strong level of income.
“With many changes on the horizon for landlords, including the proposed restrictions to mortgage tax relief and looming interest rate rises, it’s never been more crucial to have a decent cushion of rental income to absorb any rising costs.
“However, many landlords are failing to correctly calculate their returns, and our earlier research shows that a worrying number entered the BTL market with very little forward planning. Without a clear picture of what they earn from their BTL investment, a landlord is more vulnerable to market changes. Landlords must have a clear strategy and plan ahead to be able to accurately assess how futureproof their investments are.”
Typical HMO landlords purchase properties worth £245,486 with a £170,310 mortgage with a rate of 5.17%, while standard landlords purchase homes worth £183,391 with a £138,594 mortgage at 4.00%.
