Limited companies becoming the buy-to-let norm

Research released has revealed that limited companies made up the majority of rental property purchases in the first nine months of 2017, accounting for 70% of all completed sales. That’s up from 45% in the same period last year. This huge change in the buy-to-let industry has reportedly been sparked by the recent tax reforms on mortgages – a shift that appears to be causing independent landlords to exit the buy-to-let market.

Rising value

The latest Kent Reliance Buy to Let Britain report found that value of the British rental sector rose by 6.4% last year, driven largely by property price increases. The growth equates to an extra £82.6bn, putting the total value of the sector at £1.4tn. However, this doesn't tell the whole story.  

Also evident in the figures is a slower growth in the number of tenants. Just 2.2% more renters were recorded during the period. That’s less than a third of the number for the same timescale in 2014. Perhaps unsurprisingly, landlord confidence has also dipped, with just 41% expressing confidence in their portfolio.

Changing buyers

Much of the decline in confidence appears to stem from individual, small-scale landlords. Because the removal of mortgage interest tax relief only applies to individuals, not limited enterprises, it seems that more and more of this group are opting to either create companies or look for other financial options elsewhere.

The survey results show that investors with more than ten properties have added an average of one property to their portfolio in 2017. In contrast, those with fewer than five properties made no additions at all.

Dealing with the squeeze

Investors with just one rental property account for 62% of landlords. If they’re not buying, the letting market volume is likely to decline. For those who are staying in the sector, that means rental yields could increase – generating some welcome extra revenue.

However, rising rents also increases the risk of late payment and default among tenants. And with the tax changes kicking in, maintaining a steady cashflow and ensuring tenants pay when they can remains critical to a successful buy-to-let business.

For information about how we can help you look after your cashflow, and recoup unpaid debt in a sensitive, ethical manner, contact a Dukes Bailiffs operator today.