Landlords open to expansion via Limited Company route

The latest property survey found that there is still a significant appetite to invest in property, despite most of those surveyed understanding that they would be affected by the changes to income tax liability. Around 75% of those looking to buy said that buy-to-let would be for part of the mix, while houses in multiple occupation (HMOs) were also flagged as an option.

Those surveyed also stated they were going to look very seriously at setting up a limited company for any further expansion.

What’s really happening is the market is getting far more specialised. Portfolio landlords are coming to the fore, as fewer people are getting into buy-to-let as an alternative pension strategy. It seems the “serious” landlord is very open to expansion particularly in the (HMO) sector.

University Town lettings

Nearly all of the UK’s top 20 postcodes for buy-to-let rental yields are located within close proximity to a university campus.

The lettings platform ranked UK each postcode based on the highest yield available to buy-to-let landlords and found that 17 out of the top 20 are within easy reach of a university campus.

Top buy-to-let hotspots

Bradford’s BD1, covering the city centre – is the best university investment option in the UK. It has an average house price of just £54,938 and an average monthly rent of £468, meaning that buy-to-let landlords can achieve yields of 10.2%.

Sunderland’s SR1 is the second-best university postcode for property investment with yields of 9.4%, followed by Liverpool’s L7 close to both the University of Liverpool and the Royal Liverpool University Hospital with yields of 9.3%.

Landlords with properties in the TS1 postcode close to Middlesbrough train station and Teeside University can generate yields of 9.2%.

Limited company mortgages gain more ground

55% of landlords surveyed will use limited companies for future property purchases, which is more than double the 24% of landlords who intend to buy as an individual.

In the final quarter of 2018 around 44% of landlords planned to use limited companies for purchases and in Q1 of 2019 the number was 53%.

Limited companies are most popular among landlords with a portfolio of 11 or more properties with 71% using them for purchases. It is still the dominant option for those with portfolios of 10 or fewer with 51% saying they will go down the limited company route to buy their next property compared with only 27% buying as individuals.

Buy to let opportunities

Thanks to increased competition among lenders, the number of BTL products available has hit its highest level since the beginning of the financial crisis in October 2007, according to data from Moneyfacts. Over the past 12 months, the total number of available BTL products has risen by 21% to 2,396 in June, up from 1,929 the previous year.

The average mortgage rate has dropped thanks to the increasing options here, with an average two-year fixed rate now at 2.88% (compared with 6.36% in October 2007). These increased options and lower mortgage rates show there are currently some good opportunities out there for landlords.

Expanded options have also been seen in lenders’ criteria. As more challenger banks in particular have entered the BTL mortgage market, they are increasingly looking to specialise in criteria for professional landlords.