Posts with tag: property investment

New research from Precise Mortgages shows that landlords with bigger portfolios have swung dramatically to using a limited company status for new property purchases, highlighting the ongoing switch in the buy-to-let market, as investors reshape their portfolios.

The specialist lender found that almost two out of three (64%) landlords with more than four properties who plan to invest further this year would use a limited company status, compared with just 21% who intend to buy as individuals.

Across the sector as a whole, 44% of landlords planning to buy will use a limited company status, but that drops to 17% among those with one to three properties. Around two in five (37%) landlords with smaller portfolios will purchase as individuals, the study shows.

Precise Mortgages also found that more than six in ten landlords planning to fund new purchases this year will use buy-to-let mortgages. However, 73% believe that lending criteria and portfolio application process changes, introduced by the Prudential Regulation Authority, are making it more difficult to secure loans, while 57% say that the changes will slow applications down.

Limited company status is growing in popularity, as the phased reduction in mortgage interest tax relief does not affect limited company landlords, who can continue to offset mortgage interest against their profits, which are subject instead to Corporation Tax of 19%, rather than Income Tax rates.

The interest coverage ratio on limited company applications is also lower than for most individual landlord mortgages.

Alan Cleary, the Managing Director of Precise Mortgages, comments: “The buy-to-let market is changing and the switch to greater use of limited company status is one aspect of the development underlining the increasing maturity of the sector.

“There are good reasons why limited company buy-to-let is dominating the purchase market, and we expect that will continue to be the case this year and next. Brokers and customers, however, need expert specialist support when buying as a limited company or considering switching to limited company status, as there are considerable costs involved.”

The number of landlords purchasing properties in London with cash hit a seven-year high in 2018, according to new data from Hamptons International.

Its Monthly Lettings Index shows that almost half (48%) of landlord purchases last year were made in cash, which is up from 33% in 2017.

However, the rise in the number of cash purchases comes against a backdrop of fewer properties being bought by investors in London last year.

Historically, landlords in London were the most likely to use a mortgage to purchase their buy-to-let properties, but this changed in 2018. More stringent stress testing on buy-to-let mortgages, combined with the reduction in mortgage interest tax relief, has made it more difficult and less appealing for some investors to get a mortgage, particularly in lower yielding locations, where landlords tend to have bigger loans.

Many landlords in the capital who purchased with cash last year raised the money by remortgaging other assets, Hamptons International found.

Aside from London, Wales was the only other region to record growth in the number of landlords buying with cash.

Across Great Britain as a whole, the proportion of cash purchases by landlords dropped from 55% in 2017 to 54% last year.

Scotland experienced the greatest decline in cash purchases. North of the border, the number of buy-to-let properties bought with cash fell by 7%, to 47% of all acquisitions in 2018.

Last year, landlords in the East of England became the most likely to use a mortgage for their purchases, while those in the north were more likely to buy with cash.

In 2018, 63% of landlords purchasing properties in the north did so using cash, rather than a mortgage.

Landlords, how do your buying habits reflect the trends identified across the country by Hamptons – are you more likely to purchase using cash, or a buy-to-let mortgage?