Why Landlords Are Turning To Multi Unit Freehold Blocks

Why Landlords Are Turning To Multi Unit Freehold Blocks Over the last couple of years we have seen an increase in multi unit freehold properties as an investment choice for landlords. With that in mind I thought it may be worth looking at some of the reasons why our clients have chosen this route. The […]

August 6th, 2024

Why Landlords Are Turning To Multi Unit Freehold Blocks

Over the last couple of years we have seen an increase in multi unit freehold properties as an investment choice for landlords.

With that in mind I thought it may be worth looking at some of the reasons why our clients have chosen this route.

The Benefits of Multi Unit Freeholds

Diversification of Income

Owning multiple units in a single property provides a diversified income stream. If one unit is vacant, the rental income from the other units helps to maintain a steady cash flow, reducing the risk associated with void periods and allowing the landlord to seek the best tenant rather than the first to apply.

Economies of Scale

Managing multiple units in one location is more cost-effective than managing separate properties, makes sense really. Maintenance, repairs, and property management can be centralised, reducing overall costs per unit. It can also make it easier to negotiate better terms if using a managing agent.

Higher Income Potential

Multi-unit properties typically generate higher total rental income compared to single-family homes. With multiple tenants, the aggregate rent is usually higher per square foot, leading to greater potential profitability.

Financing Opportunities

Lenders may view multi-unit properties as less risky compared to single-family homes because of the diversified income stream. This can result in more favorable loan terms and interest rates. Our experience is that lenders are more positive and keen to mortgage multi unit freehold properties for these very reasons.

Market Demand

There is often strong demand for rental units in multi-unit properties, particularly in urban areas where housing affordability is an issue. The yields for MUFB properties in urban centres or university locations is generally far higher than single residential units. This demand can lead to lower vacancy rates and stable rental income.

Potential for Development

Owning a multi-unit freehold block provides opportunities for future development or redevelopment, which is why we often see property developers take on MUFB properties and hold them as an investment. Development could involve adding more units, converting existing units, or even redeveloping the entire property for a different use.

Financing MUFB Properties

There are more options than most landlords or property investors realise. In many cases the options to finance a MUFB can be more varied than with a standard buy to let mortgage. Finance can be arranged:

Fixed or variable rate
Interest Only or Repayment
Up to 80% loan to value
Different ownership models
Can include commercial space also

In short, if you want to know your options on financing MUFB properties then get in touch.

In summary, investing in multi-unit freehold blocks can be a lucrative strategy for landlords seeking steady income, potential for growth, and lower risk compared to single-unit or HMO properties.

By Dave Farmer

David Farmer

Over 30 years finance experience. Former credit underwriter, founder of Lime Finance Solutions in 2012. Multi Award winning business, featured in Sunday Telegraph, Parliamentary Review, Sky TV and others. Regular contributor to press and business associations. FCA Authorised, ALIBF Qualified. Specialist in Commercial Mortgages, Business Lending, Property and Development Finance.