Recent headlines have declared the demise of the ‘dinner party landlord’. This has always struck me as a strange term, though not as odd as the ‘accidental landlord’, referring either to a person who has inherited a property (‘lucky landlord’ might be a better description?),  or someone who has bought a place, usually a flat, to live in, then moved on to a second home and rented out the initial property. This doesn’t strike me as something that happens by accident. ‘Amateur’ landlord also sounds vaguely insulting. So, I’ll stick with ‘part-time landlord’, if you don’t mind. 

Is the part-time landlord really in demise? In short, yes. According to the English Private Landlord Survey, carried out by the government, in 2010, 78% of landlords owned just one property. By 2021, that proportion had dropped to 43%, representing just 20% of the accommodation in the private rented sector. Some 39% of landlords owned between two and four rental properties, and the remaining 18% owned five or more properties, the latter representing almost half (48%) of all tenancies. 

There has evidently been a considerable shift in the private rented sector over the years, with portfolio landlords increasingly dominating the landscape. According to an extensive piece of ‘Landlord Leaders’ research we carried out in H2 2022, this evolution has been welcomed as a positive, with landlords themselves identifying three key benefits to increased professionalism in the market: improving tenants’ lives; driving landlords ‘who aren’t properly set up’ out of the sector and improving landlords’ reputation. 

On the financial side, this shift to greater professionalisation has played a key role in the surge of demand for limited company buy to let. Hamptons says a record 50,445 landlords registered limited companies in the year to September 2022, taking the total past 300,000, and we expect this trend to continue, particularly as rising interest rates put pressure on landlords’ margins, prompting them to seek greater tax-efficiencies. Holding property in a limited company offers a range of tax benefits, flexibilities and freedoms which owning as an individual does not, arguably the foremost being that ‘incorporated’ landlords can still offset their mortgage interest before they are taxed, unlike their ‘personal’ counterparts, which can make the difference between profit and loss. 

Incorporating a single buy-to-let into a limited company wrapper can make sense for many part-time landlords, as it can confer the same tax benefits per property, but the evidence suggests that multiple/portfolio property owners are more likely to go down the limited company route – Hamptons says the average limited company has 3.3 properties with mortgages outstanding. 

And while more than 300,000 landlords have now incorporated, government figures reveal that more than 2.7 million have not – or at least, not yet. Setting up a limited company or transferring property into one takes time, money and a good tax adviser, not usually a landlord’s existing accountant. There are numerous costs and concessions, and calculations must be made depending on an individual’s tax position, so incorporation does not make sense for everyone. 

But there are many landlords who could save substantial sums by incorporating, and will increasingly look to do so in an effort to run their portfolios successfully in a tough economic environment. 

Mortgage brokers should anticipate more buy-to-let borrowers enquiring about company buy to let as the market continues to professionalise, and lenders need to get ahead of the trend with appropriate products and support. Of course, mortgage brokers cannot give advice in this area themselves, but best serve their clients by seeking out a qualified tax adviser who can, and referring them on.

Adrian Moloney is group director of intermediaries at OSB Group