You’ve got to admire the UK’s buy-to-let (BTL) landlords for their tenacity and flexibility. Here is a group of people who continue to provide homes for a significant proportion of the UK population, despite 12 years of increased external pressure in the form of tax and legislation, which shows no sign of letting up.
The screws started tightening in 2013, when then Chancellor George Osborne announced that BTL mortgage interest payments would no longer qualify for tax relief. That major change meant landlords became the only small businesspeople in the country to be taxed on turnover, rather than profit. Since then, other allowances have been systematically reduced, stamp duty increased and a growing raft of legal obligations imposed.
The latest legislative burden is the Renter’s Rights Bill, passed by the House of Lords earlier this month, which could take effect before the summer. The bill includes numerous changes that will make it more difficult for landlords to get rid of problem tenants and harder to rent to groups such as overseas students. Some observers believe that the new terms of engagement are so restrictive for landlords that many will simply exit the market, reducing supply and pushing rents to new record levels.
However, past evidence suggests that many landlords will adapt. Predictions of a mass exodus of landlords from the BTL market began when interest rates started rising in 2020, but has simply not come to pass. Yes, some of the smaller landlords have left, and the long-term trend is towards larger, portfolio property investors making up more of the market (according to Zoopla, 50% of all private rented sector (PRS) stock is now owned by just 20% of landlords).
But BTL landlords have continued to display the same doggedness and versatility in recent years as has characterised the sector for the last decade.
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Landlords adapt strategy
When the going gets tough, landlords change strategy. A few may choose to streamline their portfolios or sell up altogether, but others look for new ways to finance their existing investments or expand their portfolios. Some seek alternative ways of leveraging and more efficient financial structures to keep their businesses as profitable and successful as possible in the long term.
Of late, many landlords have been converting their property businesses into limited company structures, or buying new units within a special purpose vehicle (SPV). We are seeing a lot of landlords buying run-down property at auction and refurbishing, or converting standard homes into houses in multiple occupation (HMOs) or investing in multi-unit freehold blocks (MUFBs), where they can get more bang for their buck. Others are buying semi-commercial flats above shops and restaurants, which can represent great value for money at purchase. We also see BTL applications on properties as diverse as Right to Buy council houses, homes in holiday parks and stone cottages on far-flung Scottish islands.
Private landlords are endlessly creative in their efforts to find, buy, alter and rent out suitable properties for a range of tenants – and as market, tax and legislative conditions have tightened over time, they have become increasingly inventive in their business strategies. The mortgage industry has responded by creating innovative financial solutions to meet landlords’ increasingly complex requirements.
As a result, there is now more choice than ever in the BTL mortgage market, but it has become a more complex landscape to navigate. Buying a standard Victorian terrace with a vanilla BTL deal is one thing. Finding the right finance for a non-standard flat above a takeaway, a maisonette in a retirement community or a block of 20 student flats through a limited company is another.
The vast majority of landlords have always sought out the professional help of a broker in securing the BTL mortgages they need. These days, brokers themselves may need help seeking out the right finance for their clients with more complicated cases. Fortunately, that help is easy to find, in the form of ‘brokers’ brokers’ like Crystal, which can use their deep knowledge and leverage their close relationships with specialist lenders to identify the best solutions for almost any case, no matter how unusual or multi-faceted. These partners can help you place a case, or do the whole thing for you if you prefer.
A tenacious, flexible landlord deserves a broker with the same qualities – or, better yet, two brokers working together to deliver the optimum solution for their needs, however complex.
