Myth busting the buy-to-let market

There’s been a lot of negativity flying around about buy-to-let, with commentators reeling off lists of woes facing landlords in today’s market.

But I’m not sure that’s fair. From where I am sitting the buy-to-let market is going great guns, with volumes growing steadily and appetite from landlords for both purchase and re-mortgage holding strong.

1st Myth, Landlords can’t remain profitable

This is utter fantasy. Some landlords won’t remain profitable as they feel the impact of losing tax relief on their mortgage interest. But to be honest, the number of landlords for whom this is true is low and getting lower.

The vast majority of landlords knew where their weak properties were and have already adjusted their portfolios to protect their profitability. We’ve seen a range of approaches to improving yields where the tax changes have bitten, including selling up one or two properties from a portfolio to pay more equity into their remaining properties, thus bringing down LTV and mortgage costs.

We’ve also seen portfolios rebalanced to include more properties in areas of the country where prices are lower and rental incomes proportionately larger. Popular property types have also shifted away from single units to multi lets and HMOs.

2nd Myth, There aren’t opportunities for landlords anymore

House price inflation may be subdued at the moment, but landlords invest for both capital and income purposes and there are still plenty of opportunities for growth and profit.

Lower capital outlays are a good thing for landlords. In fact, we are seeing strong appetite on the purchase side of our business for exactly this reason. Rents are also traditionally resilient in the event of a property market downturn, so income is insulated.

The removal of tax relief has had an impact on how much income landlords can retain but as already mentioned, we’ve seen a shift away from individual buy-to-let towards the use of limited company buy-to-let on purchase lending. Recent research we conducted with BDRC1 and found that almost two in three (64%) landlords with more than four properties plan to buy using a limited company structure this year.

Help?

If you would like to know more about a new or re-mortgage please do make contact and one of our independent advisers will be happy to assist.