A Guide to Multi-Unit Freehold Blocks – or MUFBs

What is a MUFB?

Multi-Unit Freehold Blocks (MUFBs) refer to a property which has been split into self-contained units, meaning they will have their own entrances as well as their own bedrooms, kitchens, and bathrooms, though they may share outdoor or hallway space. Common examples include blocks of flats, houses that have been converted into flats, and multiple houses on one freehold.

What are the benefits of investing in MUFBs?

MUFBs are an attractive option for landlords as they typically provide high rental yields due to having multiple tenants and are also in high demand. Not only does this reduce the risk of void periods, but also means that income generated from this property type is largely steady as it’s not dependent on a sole tenant. On a more long-term note, location can play a key role in boosting income as up-and-coming areas have the potential to appreciate over time.

As such, these are a popular option for landlords, with Shawbrook’s internal application data recording a 14% increase in landlords looking to invest in this property type in 2024 compared to 2023. Similarly, the data showed a 37% increase in the value of the mortgages that landlords are applying for, indicating that they’re targeting higher-value blocks while still maintaining good leverage ratios.

What to look for in a MUFB property

When viewing properties it’s important to consider factors such as area and the demand rental properties face in that location. Shawbrook’s internal application data comparing 2023 and 2024 revealed that Scotland has been a particularly popular location for landlords seeking to invest in MUFBs, with mortgages agreed in principal doubling from 3.1% to 7.4%. Similarly, the North West has seen a 43% increase in the number of mortgages agreed in principal (5.3% to 7.5%). 

While it’s possible to purchase purpose-built blocks of flats, many landlords opt to purchase a property traditionally for single occupancy and convert it into a MUFB. If a landlord opts to convert a property, they’ll need to navigate planning permissions which will take time and money before they’re able to start making a profit. The rewards, though, can be significant with increases to both capital values and rents for well-located and designed schemes. There can be strategic advantages later too as a landlord could sell off individual flats to raise capital to invest in new, higher yielding acquisitions for example.

Maintaining and managing a MUFB

MUFBs tend to require more management, due to there being multiple units, and require the landlord to take on tasks such as tenant applications, rent payments, maintenance, and managing tenant relations across each of the units. This can take considerable time and money to deal with on a day-to-day basis which is why many landlords choose to hire a property management company to take on these tasks. 

Funding options for a MUFB

Though more and more landlords are looking to this property type, the market is still relatively small in comparison to single buy-to-let properties which can make funding options more limited, especially across mainstream lenders, who are more likely to have stricter criteria. This is particularly true for larger blocks. With this in mind, landlords should consider speaking to a broker to explore their options. Specialist lenders will tend to have a wider range of products they can offer MUFB investors including buy-to-let mortgages, bridging loans, and refinancing loans. Specialist lenders will also have much more experience with this property type which makes for a much smoother experience.