Historically, larger Houses in Multiple Occupation (HMOs) and Multi-Unit Freehold Blocks (MUFBs) have often been avoided due to their complex layouts, individual planning requirements, unique licensing rules, and lack of lending appeal.
Thankfully, this vital part of the buy-to-let market has made significant progress in recent years, driven by growing landlord interest in diversification, increased engagement from specialist lenders, and amplified recognition from the market regarding the available opportunities.
Today, the main challenge for mortgage brokers isn’t just keeping up with this rising demand, it’s also about identifying which lenders have successfully adapted to these ever-evolving landlord needs and understanding the multifaceted nature of sophisticated portfolio strategies.
ALTERNATIVES
With margins under pressure and tenant demand continuing to rise, increasing numbers of landlords are looking to maximise rental yield and reduce exposure to single tenancy risk. HMOs and MUFBs are ideal for this, as multiple income streams from one asset mean fewer void concerns and more resilience.
After all, owning four flats on one title, or letting a well-managed six-bed HMO, can often generate more income, and less admin, than managing several smaller units scattered across different locations.
Recent market analysis by property technology firm COHO, based on Office for National Statistics (ONS) data, valued the HMO market in England and Wales at £78 billion, with an estimated annual rental income exceeding £6.3 billion.
It added that there are approximately 182,554 HMO properties across the regions, with 74% classified as ‘small’ HMOs and 26% as ‘large’ HMOs (five or more tenants).
Regionally, London is said to account for the largest proportion at 33.9% of total HMO stock, followed by the South East (13.6%) and South West (10.7%). In London alone, the HMO market is valued at £40.9 billion, with an average HMO property worth £660,227.
Meanwhile, the South East HMO market is reported to be worth £10.8 billion, highlighting significant concentration in key regions.
FINANCING CHALLENGES
Despite their growing popularity, financing MUFBs and large HMOs still presents challenges. Not every lender will accept properties on a single freehold, or buildings with more than six lettable rooms. Others won’t entertain hybrid arrangements, such as an HMO with commercial premises on the ground floor, or place hard limits on unit count or location.
This has created a gap between landlord appetite and lender criteria. As a result, brokers are often tasked with placing cases that, while commercially sound, don’t fit the mainstream model.
CRITERIA RESPONSE
On a positive note, many specialist lenders have responded to this shift, widening criteria to reflect what’s actually happening in the market. For example, some now accept MUFBs with up to 10 self-contained units, HMOs with more than six bedrooms, and hybrid setups that combine HMO and MUFB elements.
Others have product options that account for commercial income, unusual construction, or properties owned within SPVs.
In most cases, these aren’t problem properties. But deals can fall apart if the right checks aren’t made up front. Misunderstandings around licensing, valuation approach (investment vs comparable), and classification of use can all delay or completely derail the transaction.
For example, assuming a commercial valuation will apply without checking local market data or failing to confirm whether a licence is already in place, can lead to underwriting complications later down the line.
RELATIONSHIPS
This is where a strong relationship comes into play. Brokers who engage early with both lenders and valuers, and who clearly document the nature and use of the property, can help avoid these pitfalls. Some lenders will also work directly with brokers and valuers to provide guidance before submission.
Building confidence with these property types is a smart commercial move. As more landlords look beyond ‘standard’ lets, brokers who understand how to structure and place these deals will be best positioned to retain their clients and attract new ones in what remains a challenging but opportunity-laden buy-to-let marketplace.
