Embracing limited companies in the BTL market

The research showed that the incorporation trend has accelerated dramatically over the past four years. In 2020, only 36% of properties owned by landlords were held within a limited company. Today, this figure has risen to 81%, with new acquisitions by these landlords almost exclusively made within such a structure. This substantial increase underscores the strategic advantage landlords see in this ownership model.

While nearly 8 in 10 landlords own their rental properties as individuals, 22% have at least one property owned within a limited company, with 9% exclusively holding their entire portfolio in this structure. Landlords with properties in a limited company typically hold larger portfolios, averaging 12.3 properties, reflecting their more extensive and leveraged profiles.

The research also found that landlords with properties held in a limited company tend to borrow more, owing an average of £1.1 million—twice the amount owed by their unincorporated counterparts (£519k). Despite this higher borrowing, the average LTV ratio remains at a balanced 50%, with a broad distribution across different LTV categories.

This leverage strategy, combined with structured benefits, contributes to higher confidence levels among limited company landlords. A notable 54% of these landlords feel optimistic about the future, compared to 45% of unleveraged landlords and 31% of traditional borrowers.

In addition, limited company landlords have shown robust levels of activity, with 22% purchasing new properties in the past year, compared to just 4% of unincorporated landlords. And, looking forward, two-thirds of expansionist landlords plan to make their new purchases within a limited company structure, while only 31% intend to buy in a personal name, less than half the rate of those choosing incorporation.

Long-term planning is also a crucial consideration for landlords. According to the report, 44% of landlords intend to leave their portfolios as an inheritance, while 40% plan to cash in their investments in the future. Notably, 25% aim to make their portfolios their main source of income, a goal more common among those holding properties within a limited company and portfolio landlords with 4+ BTL mortgages (both at 35%).

For mortgage intermediaries, the shift towards limited company ownership in the BTL market represents a significant opportunity. And, as the BTL market continues to evolve, staying abreast of current trends will prove essential in providing top-tier advice which can help guide landlord clients towards making more informed and beneficial investment and financing decisions.

For intermediaries only