nigel woollsey

Nigel Woollsey

Online Writer
Published: 08/11/2019

The popularity of using a limited company vehicle for landlords to purchase buy-to-let properties continues to grow. Recent research from Foundation Home Loans has revealed that almost two-thirds of the landlords surveyed said that they were planning to buy using a limited company – a significant increase since quarter two when the figure stood at 55%.

Interestingly, the idea of using a limited company vehicle has grown in popularity for landlords regardless of the size of their property portfolio. Previously, using this method was favoured by those with larger portfolios, but Foundation Home Loans’ research shows that this is now also the most popular method for landlords with a portfolio ranging from just a single property up to 10 homes.

Running a property rental business through a dedicated limited company has grown in popularity since 2017, when the Government began to reduce the tax relief that individual private landlords enjoyed – a process that will eliminate this benefit entirely in 2020. As a result, incorporating your portfolio as a buy-to-let limited company has become increasingly popular.

Number of buy-to-let mortgages for ltd companies increases

The market has responded to this with a marked increase in the type and overall number of buy-to-let mortgages for limited companies. According to Moneyfacts research, there are over 2,600 buy-to-let mortgage products currently available from UK lenders. Of these, approximately 875 are products that are available for buy-to-let limited companies, special purpose vehicles (SPVs) or offshore limited companies. This is a marked increase from 2017 when the number stood at 425 of 1,788 total products available (23.8%).

HMOs becoming more popular with landlords

The research also highlighted that there is a potential sea-change in the type of properties that are becoming popular with all landlords. Houses of multiple occupancy (HMOs) continue to generate the highest rental yields at 6.5%, with 20% of all landlords now having HMO property in their portfolio. These are particularly popular among landlords in Wales and the East Midlands, where 31% and 26% of landlords respectively have at least one.

When it comes to lending for buy-to-let mortgages, landlords continue to overwhelmingly favour using mortgage brokers and intermediaries. Some 73% of all buy-to-let mortgage business – including new mortgages and remortgages – is placed via an adviser, while 19% of landlords go direct to a lender. A tiny 1% of landlords said that they used a buy-to-let mortgage comparison website.

Jeff Knight, director of marketing at Foundation Home Loans, said: “The rise in limited company usage by landlords shows no sign of tailing off, particularly as we have a more professional landlord community who recognise the benefits of using such a vehicle.

“It’s therefore perhaps no surprise to see a growing number of landlords signalling their intention to make their next purchase through a limited company.”

Moneyfacts.co.uk has created a guide that outlines the basic process for landlords who are interested in setting up a buy-to-let limited company, as well as the benefits and disadvantages of this method: How to set up a buy-to-let limited company . In addition, there are a few guides for existing and first time-landlords, including Five steps to becoming a buy-to-let landlord, as well as Landlords’ rights and considerations.

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