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Looking ahead – how will landlords invest in 2020?

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Investing in houses of multiple occupation (HMOs) will be the preferred strategy of landlords who plan to add to their portfolios in 2020, according to new research from Paragon Bank.

how will landlords invest in 2020

 

The data, from the final quarter of 2019, revealed that a third of landlords looking to buy property aim to invest in shared housing. A quarter plan to buy flats with just 18% looking to purchase terraced homes.

HMOs appeal to experienced landlords because they can provide a higher yield than homes rented through standard tenancies. According to Paragon’s research, HMOs achieve an average yield of 6.5% compared to 5.6% across other property types. However, this type of housing is often more complex to manage.

The figures revealed that 10% of landlords, with four or more properties, have plans to increase their portfolio in 2020. This compares to just 1% of landlords with fewer properties.

They also show a slight improvement in landlords’ confidence in the sector since the previous year. Paragon’s Confidence Index (produced by asking landlords to rank their confidence out of 10) saw a score of 6.2 during the period – up from 5.8 the previous quarter and the highest figure in a year.

Paragon’s research also highlighted a trend towards business restructuring. More than six out of 10 landlords, expecting to purchase property in the next quarter, will do so in a limited company – up from 38% two years ago.

Richard Rowntree, director of mortgages at Paragon, said: “The private rented sector needs to grow to meet increasing levels of tenant demand and it’s clear that portfolio landlords will drive that growth.

“Not only are they looking to build their portfolios, they are also looking at more complex types of property that will deliver higher yields, such as HMOs.”

Read more about this story on the Mortgage Strategy website.

Neil Jennings

Neil background is in marketing and business development and has over 20 years experience in the field. He runs Asset Grove and is involved in the marketing strategy for most of our campaigns.

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