Insight and events

Adrian Moloney, Group Intermediary Director, Kent Reliance for Intermediaries

Over the past few years, we’ve seen many ‘part-time landlords’ leaving the buy to let industry and selling their rental properties because of increased taxation and higher mortgage interest rates, as well as tighter rules and restrictions. Their exit has made way for more portfolio landlords and resulted in increased professionalisation within the sector. This trend is borne out in findings in OSB Group’s Landlord Leaders report which found that 73% of brokers and 64% of landlords agree that the sector is professionalising¹.

The shift shows that landlords are looking to change the way they invest and manage their rental properties. Although the average buy to let mortgage rate remains stubbornly high, the typical portfolio landlord still has nine tenancies across an average of 7.8 properties – likely due to the number of single property landlords divesting and exiting the market². Landlords with portfolios of between six and 10 properties have the highest rental yield expectations over the next three months, with 56% of them rating their outlook ‘good or very good’³. What’s more, those with HMO properties earn the highest rental yield of all at 6.3% - a full percentage point more than the average overall rental yield⁴.

The growth of limited companies

With the number of portfolio landlords growing, there also appears to be an increase in the number registering to become a limited company so that they can benefit from the various tax relief measures that come from incorporation. According to the latest research from estate agents Hamptons⁵, the number of buy to let companies set up more than doubled between 2016 and 2022, and almost three-quarters of all new buy to let purchases made so far in 2023 have been through a limited company structure. Landlords with larger portfolios are more likely to run their rental businesses as a limited company, with landlords letting an average of nine properties through their companies⁶.

This move to incorporate could be explained by limited companies still having the ability to offset 100% of mortgage interest against profits, meaning that a company could pay less tax than an individual holding property in their own name – even if they’re a lower taxpayer, let alone a higher or additional rate taxpayer. For this reason, many landlords are either transferring their current properties to a limited company or registering their company to buy new properties. Note, buy to let landlords should seek tax advice around the implications of transferring to a limited company structure.

How Kent Reliance for Intermediaries could help

With this in mind, if you’re contacted by a client who’s after a buy to let mortgage to purchase their next property, Kent Reliance for Intermediaries could help.

We use our market knowledge and flexible criteria to offer tailored solutions where other lenders may struggle. With our willingness to consider cases that fall outside of standard criteria, we can help your clients that hold their private rental properties in incorporated companies.

We accept intercompany loans, shareholder deposits and director loans as deposits. We also don’t apply specific SIC code requirements and accept newly formed SPVs and LLPs.

Our improved buy to let offering now enables us to consider HMOs of up to 20 lettable rooms. We’ll even consider applications with multiple flats or houses on a single freehold.

And if that’s not enough, it’s worth knowing that we don’t set limits on the size or value of existing portfolios held with other lenders, and there’s no limit on the number or value of properties mortgaged with us.

So, if you’re looking for mortgage solutions for your professional landlord clients and you’d like to discuss how we could support you, get in touch. Speak with your business development manager, call us on 01634 888260 or message us using Live Chat.

Sources:

¹ https://landlordleaders.osb.co.uk/media/0hfhu2li/osb-landlord-leaders-report.pdf

² BVA BDRC Core Landlords Panel Report Q3 2023 (slide 45)

³ BVA BDRC Core Landlords Panel Report Q3 2023 (slide 11)

⁴ BVA BDRC Core Landlords Panel Report Q3 2023 (slide 23)

⁵ https://www.hamptons.co.uk/articles/the-unstoppable-rise-of-corporate-ownership#/