Many landlords have been feeling the squeeze over the last few years, various changes have come in regarding regulations and the changes to mortgage interest relief just to name a couple of things.  Although the private landlord sector has taken a hit with these changes they do provide a vital housing solution to the country.


If you are a landlord possibly looking at expanding your portfolio but are concerned about reduced profitability, you could consider multi-unit blocks as a way to boost your rental yield.  A multi-unit block is effectively more than one self contained unit on one freehold.


The first reason to consider multi-unit blocks is that you can potentially purchase a block of two self contained flats for around the same price as one house.


Let’s make a hypothetical example, you could buy a property which is split into 2 self contained flats for £125,000 or you could buy a 2 bedroom house for the same amount.  Each of the self contained flats could rent out for £400 per calendar month giving a yield of 7.68%.  Whereas the house may rent out for around £550 per calendar month which would be a yield of 5.28%.  This is only an ‘in theory’ example but is there to illustrate that a multi unit block can make your money work better for you.


Another benefit to multi-unit blocks is that as they are on the same freehold you only incur one stamp duty charge compared to if you were buying two individual flats.  There are some possible drawbacks to multi-unit blocks though which need to be considered.


As the property is two units it means there are two sets of costs to consider when looking at repairs, this means you have two bathrooms, two kitchens and two boilers to maintain amongst others which, if even two of these needed addressing at the same time, could be quite a costly experience especially if you are ill prepared for it.


Another consideration is that the current mortgage market for multi-unit blocks is limited, there are only really a handful of lenders that can be considered.  Some of the lenders impose restrictions such as you need to be an experienced landlord, definitions of experienced landlords differ from lender to lender, or that each unit has a minimum value sometimes around £75,000 and above per unit.  As the market is limited the interest rate that is payable is usually higher than what you would incur if you bought a standard single unit.


Daniel Brown BSc (Hons), Cert SMP

29th April 2019

Potential In Multi-Unit Blocks
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