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Limited company BTL V Individual – what do the numbers say?
What’s the difference between a limited company portfolio landlord, compared to a portfolio held by an individual or group of individuals?
BVA BDRC, who interview members of the NRLA each quarter on behalf of lenders, kindly share with us this data from their respondent set of just over 800 landlords surveyed in Q4 of 2020.
The limited company BTL market
Limited company now accounts for 34% of all BTL mortgage products (up from 24% in 2017).
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Hamptons International report that Companies House returns show that 41,700 new buy to let companies were formed in 2020, an increase of 23% on 2019. limited company BTL is the 2nd most common type of new business types formed in 2020, after online retail businesses.
Landlord profile
At the end of 2020, nearly 2 in 10 landlords owned some of their portfolio in a limited company structure. This has remained quite consistent over the last 5 years.
BVA BDRC found that limited company landlords were more likely to be male (77% v 57%) than landlords with properties held as an individual or group of individuals.
The average limited company landlord holds around 16 properties in their portfolio, worth around £2.1m, bringing in rent of £95k, that’s a rental yield of 6.4%, whereas a non-limited company landlord averages 5.9 properties at 1.1m value in total and bringing in an average £46k, with a yield of 5.6%.
With an average yield of nearly 1% over their non-limited company counterparts, it is unsurprising therefore that limited company landlords are more likely to be making a profitable full time living from their buy to let business 43% v 29%. They also report feeling more optimistic about their yields after the pandemic.
Limited company BTL borrowing trends
Limited company landlords are more active. They borrow more for their portfolio, and they pay back more annually. Despite their per property values being lower, they borrow more, leveraging their borrowing. 7 in 10 have a BTL mortgage on one of their properties, which is higher than the average 57% of individual landlords. They have 6.2 mortgages compared to 4.6 mortgages held by non-limited company landlords and are much more likely to remortgage this year at 41% v 23%.
Invest or divest in 2021?
Limited company landlords are twice as likely to intend to invest and grow their portfolio in the next year than their non-limited company counterparts. 94% of landlords who hold at least one property in a limited company structure, intend to buy their next one in a limited company structure as well.
Find out about our 6-month landlord underwriting facility for portfolios and more, by calling us today.
