The sharp increase in the number of buy-to-let properties in limited companies over the past decade has been driven by younger, newer landlords purchasing properties within a corporate structure from the outset.
This is evident from a recent Paragon Bank survey of more than 500 landlords, which found that almost one in three (29%) manage their properties exclusively through a limited company structure.
While a further 36% divide ownership between corporate entities and personal names, two-thirds (65%) of landlords have created at least one Special Purpose Vehicle (SPV) for their buy-to-let investments.
Paragon’s research shows that a new generation of landlords is helping to bring about this shift. choose a private company from the beginning.
Among landlords in the 25 to 34 age group, 57% of properties are owned by limited companies, while 43% are owned through a combination of corporate and personal names. In the 35 to 44 age group, the number of companies falls to 46%, while a further 39% are mixed, putting them just behind the youngest group in SPV adoption, something that broadly declines as the age of lessors increases.
Following the pattern observed when looking at the cohorts by age, limited company ownership is highest among the newest landlords and declines as experience increases.
Those who have been in the market for five years or less hold 80% of their portfolios in public companies, with the remainder divided between personal name (11.5%), mixed ownership (7.5%) and limited liability company (1%). The share of real estate assistance in SPVs drops to 40% for landlords with six to 10 years of experience, 21% for landlords between 11 and 20 years, and just 16% for the most seasoned operators with 21 or more years of experience.
Commenting on the latest figures, Louisa Sedgwick, Director of Mortgages at Paragon Bank, said: “In an effort to soften the impact of the tax changes introduced in the second half of the previous decade, more and more landlords have chosen to hold their buy-to-let properties in limited companies over the past decade. Interestingly, our research shows that younger and newer landlords are more likely to structure their portfolios in this way, and do so earlier in their landlord careers.”