A new report by Roma Finance has revealed that a record number of BTL landlords are converting their properties into HMOs. This is a direct result of the tax changes coming into force from April, which is resulting in landlords trying to increase their rental income.

Roma Finance said that they funded more conversion cases of this type during 2016 than in any other year. The firm said that the rise in HMO conversions is due to the potential increase of yields from the larger property. In addition, they present a larger opportunity to rent more rooms out to tenants in towns and cities, particularly in areas with a large student and young professional population.

Scott Marshall, managing director at Roma Finance, said: “Recent Government policy has put the spotlight on the buy to let market and landlords have acted quickly to mitigate any negative effects on their income. Many want to retain property but maximise income and we have worked with many landlords to fund conversions to HMOs.

“One landlord we worked with calculated that in one of their properties they could rent out five rooms, vastly increasing income and yield, for just a £30,000 conversion cost. The increased rental income would cover the cost of the loan over twelve months. In this case it made a lot of sense to carry out the conversion.”