INNOVATING PROPERTY where the landlord decides to rent out a property under one tenancy agreement . This is typically suited for families and couples , a more straightforward investment strategy .
So why does the current market conditions matter ? Currently the Bank of England is under pressure to increase interest rates because it has a target to keep inflation under 2 %. The Bank rate is already at its highest level for 14 years , rising consistently in response to the soaring cost of living . Just under a third of households have a mortgage , according to the government ' s English Housing Survey meaning many homeowners and Landlords are now facing much more expensive monthly repayments . The BBC have found in comparison with pre-December 2021 , average tracker mortgage customers will be paying about £ 394 more a month , and variable rate mortgage holders about £ 251 more . The increase in mortgage rates for Landlords can significantly reduce profits if high cash flow strategies are not being utilized .
But what does this really mean for investors ? Let ’ s imagine a £ 175,000 3 bed house with 2 reception rooms that can be converted into 2 bedrooms . If this property is converted to a 5-bedroom HMO the landlord could potentially earn £ 550 per a bedroom . That would provide a monthly income of £ 2,500 before expenses . However , if the landlord decides to keep the property as a Buy-To-Let they would gain a monthly income of around £ 1,500 . With the current rising mortgage rates and uncertainty of the market , investors will further begin to see less of their monthly profits . With HMO properties there is less exposure to rent arrears that will
SA Real Estate Investor Magazine APRIL / MAY 2023 122