Rise Of The Buy-To-Let Company | moneyfacts.co.uk

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Peter Sargent

Sub Editor / Proof Reader
Published: 20/01/2022

A record number of buy-to-let companies were set up in 2021. Research published by residential estate agent and property services company Hamptons in its latest Monthly Lettings Index shows that a record 47,400 new buy-to-let companies were formed last year.

That’s a new total of 269,300 buy-to-let UK companies, many of which have set up since the withdrawal of mortgage interest relief for investors with properties in their personal names five years ago. This made it more profitable for some landlords to move buy-to-lets to a company. With half of all buy-to-let (BTL) mortgages taken up by companies, they hold nearly a third (583,000) of outstanding BTL mortgages.

Buying to rent can be an attractive option for many, particularly in areas where rents are rising. Hamptons says average monthly rents in southern England hit the plus-£1,000 mark for the first time at the end of 2021, as UK rents overall rose 7.2% year-on-year. Indeed, London and the South East are home to 45% of new BTL companies.

Despite this growth, 25,100 companies have closed since the pandemic began, according to Hamptons, more than 15,000 of them in 2021, and in some areas the number of companies is diminishing, such as the North East, where the number reduced by 6% last year.

Smaller landlords driving the growth

Aneisha Beveridge, Head of Research at Hamptons, said: “The way buy-to-let investors hold property has changed, with the impact of the tax changes made five years ago still shaping landlord buying behaviour today. But, despite record numbers of rental homes being held in companies, the growth in buy-to-let businesses has come from smaller landlords rather than larger institutions who made up most buy-to-let company owners pre-2016.

“Today, only 20% of buy-to-let businesses hold more than three mortgaged properties, a similar profile to landlords who hold homes in their personal name.

“The number of new buy-to-let incorporations in 2021 is probably close to its peak, with fewer likely to be set up in 2022.  This is partly a product of last years’ Stamp Duty holiday which served to slow the fall in new investor numbers. Additionally, many investors who have wanted to make tax savings by transferring properties from a personal to a company name have had five years to do so.”

How to get a buy-to-let mortgage

If you already have a mortgage on your property but wish to convert it to buy-to-let, it's important to speak to your mortgage lender. You're not allowed to move tenants into your property without your lender granting what is known as ‘consent to let’.  There will be a fee charged for getting consent.

If you’re not confident about managing your property and tenants directly, a letting agent can be a great help. Be sure to get quotes from several agents for managing your property. Don’t forget landlord insurance, and consider talking to an accountant. While property is usually a good long-term investment, make sure you are aware of the risks involved. It’s a good idea to speak to a financial adviser. Our guide to buy-to-let is available here.

Keith Burch-Lovell-Head of Partnerships at Mortgage Advice Bureau comments: “With property prices rising by 10%+ (in some areas), combined with the need/desire to work from home or at the very least a hybrid working week, many First Time Buyers (and Seasoned Lifestyle Tenants) have been looking to create the perfect work/home environment. This surge in demand has seen the sector enjoy strong growth. It is felt that the continued demand will remain strong for 2022, and as with any property purchase, location, condition, and access to rail, schools and outside space will be important and should be carefully considered when buying. Get this right and you will ensure a wise buy, both now in terms of rental yield values now, but also when you come to realise your asset. Buy smart to stay smart.

Compare buy-to-let mortgage rates by looking at our up-to-date chart here.

Speak to a mortgage broker

A mortgage broker can help deal with much of the paperwork involved. They are regulated by the Financial Conduct Authority. Speak to our preferred broker Mortgage Advice Bureau. Ring 0808 1499177 or click here.

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