The Intermediary – November 2025 - Flipbook - Page 76
BUY-TO-LET
Opinion
Landlords need
more than one
investment strategy
A
lmost half of
landlords plan to
buy more property,
according to research
by Handelsbanken.
Of that, 73% are
looking to expand into different areas
of the property market.
They are, in many aspects,
responding to something learned the
hard way: puing all your eggs in one
basket can leave you vulnerable.
Focusing on the same types of
properties in similar areas has become
increasingly risky as landlords face
pressure from multiple directions,
including rising mortgage costs and
changing regulations.
One answer is diversification, and
there are several ways landlords can
achieve it.
Spreading risk
Diversification is not about buying
more properties, so much as it’s
helping to reduce exposure to any
single market shi. The average UK
landlord portfolio now contains 8.6
properties, according to the English
Private Landlord Survey, but what
maers more than the number is
the mix. When one property type
underperforms or faces regulatory
headwinds, others can offset it.
Average gross rental yields reached
7.4% in Q1 2025, according to Fleet
Mortgages’ Rental Barometer. Dig
deeper, however, and you will see
dramatic regional variation. The
North East averages 9.3%, whereas
London sits at 5.8%. Property type
makes just as much difference. Houses
in multiple occupation (HMOs) in
certain towns are generating yields as
high as 15.5%, compared to the 10.4%
national average. That’s more than
double the returns for those who know
where to look.
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The Intermediary | November 2025
Cities like Manchester saw rental
growth of 11.3% year-on-year to
December 2024, with yields averaging
6.5%1 but reaching 12% in highperforming areas. Meanwhile, other
regions have stagnated. Landlords
with properties across multiple
locations have more natural protection
against local downturns.
Beyond standard BTL
The traditional residential rental
remains popular, but some landlords
are increasingly looking at alternative
property types. HMOs draw interest
because they can provide higher
yields, and crucially, income from
multiple tenants.
Multi-unit freehold blocks (MUFBs)
present another option, as you
control the entire building and can
reconfigure or upgrade units to meet
changing demand. Some landlords
are converting lower-yielding
properties into higher-performing
assets this way.
Holiday lets have become
mainstream since the pandemic. With
the right location and management,
they can command premium rates
during peak seasons. The trade-off
is higher vacancy rates and more
intensive management, but for
landlords with the capacity to handle
it, the returns can justify the effort.
Student accommodation
MFS found that nearly 330,000 UK
18-year-olds applied to university
in the most recent academic year,
a record high. UCAS projects
applications could rise to 31% by 2030
compared to 2022.
The student-to-bed ratio across
20 major university cities stands at
2.7, meaning nearly three students
compete for every available purposebuilt bed. Some 1.3 million full-time
MARTIN SIMS
is distribution director at Molo
students are chasing just 500,000
purpose-built student accommodation
beds. In other words: the supply is
struggling to keep pace with demand.
The financial performance backs
this up. It is not uncommon for
student properties to generate returns
20% to 30% higher than standard
buy-to-let properties in cities like
Liverpool and Glasgow. Occupancy
rates also exceeded 95% in major
student cities like Manchester and
Noingham last year, significantly
outperforming traditional rentals that
might face several weeks of vacancy
between tenants.
Many students pay rent upfront on
a termly or annual basis, oen backed
by parental guarantors. That can
reduce the risk of arrears, as cashflow
tends to be more predictable. The
academic calendar creates predictable
tenancy cycles, with most lets secured
nine to twelve months in advance.
Continue to adapt
As landlords look to diversify,
they need lenders that understand
specialist property types.
Molo works with first-time
landlords and portfolio investors
alike, offering mortgages on HMOs,
MUFBs up to 12 units and new-build
properties. With no minimum income
requirement for first-time landlords,
the criteria accommodate the realities
of modern portfolio investment.
For brokers advising clients during
portfolio diversification, working
with specialist lenders that understand
these property types makes the
difference between a theoretical
strategy and the completion
of deals. ●
