It will be no surprise to any broker that the property market has been beset by a number of challenges in recent years which have impacted landlords. While a few have chosen this as the time to exit the BTL sector, the market has been characterised by a significant show of resilience and ambition.
Indeed, many have seen developments within the market as opportunities, as well as challenges. This has led some to consider the make-up of their portfolios and adapt their strategies moving forwards.
The rising popularity of HMOs
HMOs have been a long-time favourite of the professional landlord, but interest in this property type has ballooned over the last year. In 2024, HMOs made up one third (33%) of all Shawbrook’s BTL business. However, as landlords diversify their portfolios, this number has already risen to more than a third (40%) in 2025 and we expect the trend to continue.
Interestingly, while portfolio landlords — those with four or more mortgaged properties — are the main driver of this trend, we have also seen a rise in HMO business from non-portfolio landlords (from 26% to 37%). As a response to higher interest rates and increased transactional costs, such as recently increased stamp duty, newer entrants are attracted to higher yielding assets in order to build a sustainable, profitable property business. This is a change to the traditional entry point of single lets.
We’ve also seen a trend of landlords buying older, tired properties and converting them into HMOs as a way of getting into this market. HMO conversions now account for 74% of properties being developed using our bridging loans alongside a mix of houses, individual flats and blocks of flats, compared to 47% last year.
HMOs have a number of benefits for landlords, particularly in more challenging economic times, including higher yields, an ability to better pass through increases in market rents due to more regular tenant turnover and strong tenant demand. However, landlords must be aware that they also come with additional management needs and compliance responsibilities.
Experts in HMO finance will have the resources to offer mortgages tailored to the needs of the HMO landlord taking into account the higher rental income that can be achieved compared to the standard BTL. With more landlords looking into this area, and considering conversions as part of this strategy, a lender that can support the bridging loan prior to the mortgage will also be useful.
Turning to semi-commercial
Semi-commercial is another area in which we have seen significant interest from landlords in 2025. Indeed, we have seen a 46% increase in volume of applications compared to last year.
Semi-commercial properties will include an element of both commercial spaces, often retail and living space. While they can come with a higher risk of a longer void period if the commercial element needs to be re-let, they also offer landlords with more rewards from higher rental yields. Landlords can capitalise on dual revenue streams, with potential from both residential and commercial rental income.
When considering diversifying into semi-commercial, there are specific factors to consider. For example, LTVs will typically be no higher than 75%, and lenders will look at both the value and income the property could generate. As part of this, lenders will often want to see a commercial lease in place when the application is submitted as finding commercial tenants can take more time than residential ones.
