How many properties do you need before a lender considers you a portfolio landlord?
The short answer is four or more mortgaged buy-to-let properties.
Under the PRA definition, a portfolio landlord is someone with four or more distinct mortgaged BTL properties. The properties are considered across lenders rather than simply counting the mortgages held with the lender you are approaching.
Once you reach portfolio status, lenders may take a broader view of your property business. Instead of looking solely at the property you are trying to finance, they may consider your existing properties, mortgage balances, rental income across the portfolio, property values, gearing, experience and the overall strength of the portfolio.
An HMO might be a large house converted into several bedrooms, with tenants sharing a kitchen and communal areas. An MUFB might be a house converted into three self-contained flats, or a small block containing several flats under one freehold title.
The difference can affect the type of mortgage available, how the property is valued, how rental income is assessed, planning and building regulation considerations, lender experience requirements and maximum LTV.
Planning classification is also important. In England, small shared houses occupied by three to six unrelated people can fall within C4, while larger HMOs can be sui generis. Local planning restrictions can also apply.
There isn't a universal answer as to which is better. The right structure depends on the property, the investment strategy and the lender market.
At Eastgate, we look at the property as a whole before deciding whether HMO, MUFB or another form of specialist residential finance is most appropriate.
