The Intermediary –- June 2026 - Flipbook - Page 32
BUY-TO-LET
Opinion
Finding the hidden
value in MUFBs
T
he multi-unit freehold
block (MUFB) is the
lesser-known part
of the story when it
comes to properties
brokers place. Houses
in multiple occupation (HMOs) get the
airtime, while MUFBs are routinely
valued at 10% to 20% below the figure a
landlord has modelled their deal on.
The investor profile is shiing,
too, with around three-quarters
of new buy-to-let purchases now
made through limited companies,
according to Hamptons. Landlords
coming into the market look less
like someone topping up a pension
and more like an investor with a
structured business set up. MUFBs
tend to suit the laer, but they also
carry mechanics that catch out
borrowers who assume they are
buying a slightly larger single let.
Before starting
A multi-unit freehold block is a single
freehold title containing two or more
self-contained flats, each with its own
assured shorthold tenancy (AST). That
is the line that separates an MUFB
from an HMO, where rooms are let
individually and shared facilities sit at
the heart of the property.
It is also the line that separates it
from a block of flats with individual
leasehold titles, where the freeholder
and the leaseholders are different
parties. Get the definition wrong
at fact-find and the lender list can
narrow quickly before underwriting
has even started.
The right valuation
Valuation is where MUFBs most oen
surprise borrowers. A smaller block of
two or three units is typically valued
on a bricks-and-mortar basis, with the
surveyor looking at what the property
would be worth if sold to another
investor or, in some cases, broken up.
A larger block, or one with a layout
that does not lend itself to standard
30
The Intermediary | June 2026
residential comparables, may be
valued on an investment basis with
the rental income doing more of the
work or, on a vacant possession basis
The figures returned by each
method can be materially different
on the same property. A landlord who
has modelled their deal on the sum
of the individual flat values is oen
working from a number the lender
will not recognise.
Another consideration is what
the property is consented to be. A
converted Victorian terrace running
as four flats is only worth its MUFB
valuation if those flats have the right
planning consents and meet building
regulations for such use.
Conversions done informally,
and without sign-off, become a
problem at survey. Also, blocks
where the freehold sits alongside any
commercial element preclude most
buy-to-let lenders from considering.
Underwriting perspective
The argument that complex buy-to-let
like MUFB produces a yield premium
is true on the gross numbers but is
only sometimes reflected on the net.
Where MUFBs hold up beer
than the headline suggests is in
void risk. With five units on five
separate Assured Periodic Tenancies
(APTs), a single tenant leaving is
a 20% reduction in rent for a brief
period rather than a 100% void on a
single let.
What it does not protect against is
the cumulative cost of running five
tenancies and all that comes with
them, from gas safety certificates
to energy performance certificates
(EPCs).
The Renters’ Rights Act
The Renters’ Rights Act is the other
change to factor in, with phase one
now live in England.
For a block running five rolling
assured periodic tenancy (APTs), the
landlord loses some co-ordination
MARTIN SIMS
is distribution director at Molo
across the units, but no single
tenancy can sink the whole property’s
cashflow.
The right cases
So, what separates an MUFB case
that gets the green light from one
that lingers? Cases that complete tend
to share a few paerns, and most
of them come down to the landlord
having done their preparation.
They know whether the block
is being bought to hold as a single
investment or potentially split into
individual leasehold titles later.
The conversions are already
consented, and the units meet
minimum sizing. There is an honest
view of which units need work to
achieve EPC C and how improvement
work fits in with upcoming
remortgage dates. And the valuation
basis has been thought through early,
rather than the borrower assuming
the highest of the possible numbers.
Spotting potential hiccups
The cases that tend not to complete
share the opposite. The borrower has
bought into a gross yield headline
that the surveyor does not agree with,
or they have inherited a block whose
conversion history is murkier than the
seller suggested.
MUFBs reward landlords who treat
them as the operating businesses they
are. They are not a starter property
type, but they are not the high-wire
act some assume either. MUFBs sit
in the middle of the slightly more
complex buy-to-lets and deserve
aention.
On an MUFB case, the work earns
its keep before the application goes in.
By the time the valuation is returned,
the all-important conversations are
noted and factored in. ●
