Buy-to-let purchases through limited companies on the rise
Almost two-thirds of landlords plan to make their next purchase within a limited company vehicle, Foundation Home Loans has found.
This is up from 55% of those surveyed in the second quarter of 2019.
Jeff Knight (pictured), 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 signaling their intention to make their next purchase through a limited company, and as a lender it’s incredibly important that our product range reflects this, and we can offer advisers and their portfolio landlord clients access to quality products, an excellent underwriting process and a high level of overall service that taps into the needs of limited company borrowers.
“There has also been a notable uptick in limited company remortgaging at Foundation, and whether these are larger portfolio landlords or not, it’s quite apparent where the market has moved to and the growing need for limited company expertise.”
Previously, landlords with larger portfolios of 11 plus properties were more likely to say they would purchase in a limited company, but now landlords with smaller portfolios are equally likely to use the strategy.
Some 62% of those with one to 10 properties said they would purchase via a limited company next, while 65% of those with 11 plus properties would do the same.
Of those landlords who said they would purchase via other methods, 26% said they would purchase as an individual, up from 24%.
Some 8% said it would depend on the circumstances at the time, down from 13% while 6% said they would purchase in the name of a partner or spouse, a drop from 10%.
The rest said they would either purchase via another means or they didn’t know.
The research also revealed a potential step-change in the type of properties landlords were adding to portfolios and where they were likely to concentrate in the future.
HMOs continue to generate the highest rental yield for landlords at 6.5%, with 20% of landlords now having an HMO property within their portfolio.
HMOs are particularly popular in Wales where 31% of landlords have at least one. This was followed by the East Midlands at 26%.