"As the saying goes, "there’s more than one way to skin a cat", and landlords have many creative options available to increase their returns."
For some time now, property investors have been focused on finding ways to secure higher yields. While investments such as short-term lets, HMOs, and multi-unit blocks are popular options, there are lesser-known alternatives that can deliver strong returns without the need to follow these traditional routes.
One such option involves letting a standard buy-to-let property under an unconventional tenancy, which can provide landlords not only with higher returns but often greater certainty compared to a typical Assured Shorthold Tenancy (AST).
We’re noticing a growing trend among landlords opting for corporate lets instead of standard ASTs. Corporate letting agreements are frequently tailored to meet the specific needs of both the business and the landlord. Moreover, these agreements are increasingly accepted by various lenders. A case in point is Serco, which manages over 7,000 properties to accommodate asylum seekers. Several lenders are open to accepting Serco arrangements as part of their policy, offering landlords unique opportunities to boost their yields.
Other lucrative options include letting to foreign students, accommodating travelling employees through business agreements, or working with local authorities to provide housing for vulnerable tenants.
There are several benefits to these strategies for investors. Lease terms tend to be longer than ASTs, and rental income is guaranteed for the duration. Additionally, because these leases are often structured more like commercial tenancies, the corporate tenant is usually responsible for returning the property in its original condition, reducing the risk of wear and tear for landlords.
In the past, landlords seeking such arrangements often had to turn to commercial lenders, where borrowing rates are higher than those in the residential market. However, we recently worked with a client who secured a residential buy-to-let mortgage, rented the property to themselves, and sub-let it to a council tenant considered vulnerable. By partnering with a flexible buy-to-let lender, this approach enabled the client to sub-let the property, and while the interest rate was slightly higher than a typical buy-to-let mortgage, it remained lower than what would be available from a commercial lender—ultimately allowing the investor to achieve a higher yield.
As the saying goes, "there’s more than one way to skin a cat", and landlords have many creative options available to increase their returns. At Sirius, we specialise in structuring innovative solutions like these daily. Our strong relationships with lenders allow us to explore and implement unique strategies that align with our clients’ goals, helping them maximise their investments in ways they may not have thought possible.
