19th
Sep 2023
Apparently three-quarters of landlords who are planning to buy new properties over the next twelve months will do so by using a limited company.
A lender’s claims comes from its latest research of around one thousand landlords carried out BVA BDRC which finds 74 per cent of landlords intending to buy BTL properties over the next year will use their limited company.
According to the BVA’s tracker survey this ‘switch’ is the highest ever recorded which has increased to 62 per cent of landlords who said they were going to use a limited company at the beginning of the year.
At the same time landlords purchasing new properties under their own name has fallen from 41 per cent in Q4 2021 to just 17 per cent in Q2 of this year.
Limited companies ownership opens up much better mortgage financing options as the majority of lenders setting interest coverage ratios at 145 per cent for those paying higher rates of tax, whereas limited companies are allowed a lower ratio of 125 per cent and are able to borrow more than individual landlords.
A spokesperson for the lender, says: “Holding rental property within a Limited company structure has been growing in popularity since the mortgage interest relief changes introduced by the Government in 2017, but it has certainly accelerated in the past year.
“As a lender that specialises in portfolio landlords, we have always attracted a higher proportion of Limited company lending, but that has certainly increased, particularly as interest rates, and subsequently mortgage pricing, have risen.”
The survey also found that the average portfolio size of landlords in a limited company has been a continual rise since Q4 of 2021’ 13.1 per cent – in Q2 2023 year there was an increase from Q1’s 15.6 to 16.9 per cent
The average number of properties held in a limited company per landlord in Q4 2021 was 7.8 , Q1 2023 was 11.7 and Q2 2023 was 12.3.
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