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Frequently asked questions about buy-to-let: HMOs, portfolio landlords and refurb

by | Jul 9, 2019 | Brokers, Client Lenders, Clients

We thought we would share a few questions we have had from investors over the years and how we have helped them.

How many properties do you need to have to be a portfolio landlord?

According to the Prudential Regulation Authority (PRA), a landlord is considered to be a portfolio landlord where they have four or more mortgaged buy-to-let properties across all lenders in aggregate. In September 2017, the PRA brought in new buy-to-let rules for portfolio landlords. These new standards apply regardless of whether the borrower is an individual or company. Since this date, the PRA expects that lenders conducting lending to portfolio landlords do so according to a specialist underwriting process that accounts for the complex nature of the borrower and their portfolio of properties. See our blog for advice on the PRA regulations for portfolio mortgages.

What is an HMO?

A House of Multiple Occupancy (HMO) is a specialist asset class where a single property is subdivided and individually rented out to different people who share some common areas such as bathrooms and kitchens. HMOs are different from purpose-built flat blocks, as they usually will have been converted from larger single buildings. We work with a range of specialist lenders who provide mortgages specifically for HMOs. Click here for a diagram to help you decide if you fall into the definition of a HMO.

What is the difference between heavy and light refurbishment?

There is a range of short-term loans (STLs) available which will enable you to carry out light or heavy refurbishment works on an investment property. The type of loan you need will depend on the amount of proposed works to be carried out. Each lender has their own definition of light or heavy refurbishment but as a rule of thumb:

Heavy refurbishment constitutes major structural work, costing more than 15% of the property value, which could need planning permission or involve certain building regulations.

Light refurbishment works cost less than 15% of the property value. These can include cosmetic improvements to a property and smaller work such as rewiring, repainting or installing a new bathroom.