Increasing numbers of landlords are becoming ‘professional’ and setting themselves up as limited companies in order to expand their portfolio.
Research by specialist lender Precise Mortgages discovered nearly two out of five landlords would be using limited companies to purchase properties over the next year compared to 28% of individuals.
And of those with four or more properties, who now face tougher assessment from lenders when applying for a buy-to-let mortgage, 42% said they would be making their next purchase via a limited company. This dropped to 31% amongst those with up to three properties.
Precise said this all provided further evidence of the continued rise of the professional landlord and the popularity of limited companies amongst this group of clients.
Alan Cleary, managing director of Precise Mortgages, said; “Buying property within a limited company structure has become increasingly popular, particularly among larger professional landlords.
“Given the predicted rise in landlords switching to limited company status this year, we can expect this trend to continue.”
Indeed, Precise discovered recently that 89% of brokers expected the number of landlords setting themselves up as limited companies to increase. The main motivation for this, they thought, was that landlords could continue to claim tax relief on mortgage interest, something which cannot be done as an individual.
But landlords with larger portfolios were also more aware of the Prudential Regulation Authority’s (PRA’s) lending criteria and portfolio application process changes, the research discovered.
And, it found, 74% of those thought the changes had made it more difficult to secure buy-to-let finance. Precise said this might be one of the reasons there was a growing demand for more specialist lenders.
Cleary added: “The contrasting levels of awareness of the PRA’s recent changes to lending criteria and the application process between small and larger portfolio landlords points to the growing professionalisation of the latter group who stand to be most affected.
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