One in two property investors (53%) are looking to enter the HMO market, Shawbrook research indicates.
Nearly three quarters (72%) brought up high yields as the main attraction for investing in HMOs followed by the potential for capital growth (29%).
Karen Bennett, sales & marketing director of commercial mortgages at Shawbrook, said: “As far as we are aware, no real valuation framework currently exists that provides the necessary clarity.
“This is causing problems for both lenders and investors, as the perceived value of the property affects how much equity the bank is prepared to release in order to aid them in future investments.
“Too much and the bank is at risk, too little and it limits the investor’s potential for expansion. A lack of guidance in this area means there is a risk that houses being approved will be questionable in their quality and this will further increase the risk to lenders.”