Following a record year for Limited Companies in 2023, recent data shows market dynamics remain more optimistic for those investing in Limited Companies than their own personal name.
In this article we look at the latest landlord specific Limited Company data trends top see how these compare to landlords with personally held property.
According to a recent Hamptons report, a record 50,004 Limited Companies were set up by landlords in 2023 up from 48,520 in 2022. What’s more, it looks as though the rise in Limited Company investment won’t slow down any time soon.
Limited company mortgage rates more expensive?
Historically, mortgage rate pricing for Limited Company borrowers has been around 0.5-1% higher than for individuals. However, the pricing difference has decreased drastically over the last year. In July this year, average 2 and 5-year mortgage rates for individuals were 5.69% and 5.88%, respectively, compared to 5.73% and 5.90% for Limited Companies. The gap was even smaller in June, with average 2 and 5-year mortgage rates for individuals at 5.96% and 6.02%, and 5.98% and 6.03%, respectively, for Limited Companies.
What are landlord thinking?
Confidence amongst Limited Company landlords remains higher than that of individuals. Research shows 40% are optimistic about their own letting businesses, dropping to 37% when combined with responses from individual landlords. This is a significant increase from Q2 2023 when just 22% of all landlords felt positive about letting property. A further 40% of Limited Company landlords are positive about their rental yields over the next three months, but again, the data from landlords borrowing personally brings this average down to 36%.
Furthermore, Limited Company landlords are more likely to fund their property investments through buy to let mortgages. Their increased activity in the market compared to individual borrowers is evident, with a higher number of buy to let loans on average and a higher average loan-to-value (LTV), at 53% compared to 48% for individuals.
Limited company portfolio sizes
Limited Company landlord peers manage portfolios around three times the average size of those borrowing personally. Moreover, the vast majority of Limited Company landlords are incorporating, with 81% of their properties held in this structure, an increase from just 36% in 2020.
Looking more closely at how Limited Company landlords own their properties, 41% invest solely through an SPV, while 59% own a mix of in their own name and through a Limited Company structure. The average portfolio size for Limited Company landlords is 15.2 properties, 12.3 of which are held in a Limited Company.
Limited company profitability
The average portfolio value for Limited Company landlords is more than double that of those holding properties personally, at £2.9 million compared to £1.4 million. Despite the same perceived profitability between individual and Limited Company borrowers, Limited Company landlords also benefit from a higher average annual gross rental income, at £146,000, with a typical rental yield of 6.4%.
On average, the typical Limited Company landlord has 17.3 years of letting experience and is 57 years old, five years younger than the average individual landlord. Given this age difference, they are less likely to be retired, with 37% operating as full-time landlords, 25% employed full-time with rental profits as a secondary income, and just 16% retired.
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