Recently it has come to light that nearly 2 out of 5 landlords are planning to use limited companies to purchase Buy-to-Let properties within the next year. Specifically, this figure is projected at 38% which is an increase of 10% on the previous year highlighting the continuing rise of the professional landlord so should you use a limited company to purchase and manage property? There are certainly some key advantages to doing so.
Our friends over at Precise Mortgages found that landlords with 4 or more properties that were buying additional Buy-to-Let property via limited companies rose above 42% as opposed 31% for those with 3 properties or more. Of course, purchasing BTL property becomes trickier after you already own 4 properties due to the PRA’s recent changes to lending criteria.
The contrasting levels of awareness of these changes are further fueling the increasing professionalisation of the larger portfolio owners who are most affected by these new rules which is why choosing a specialist broker is becoming more and more of a viable option for these types of landlords. Indeed, we fully expect this trend to continue with the ability to claim tax relief on mortgage interest being seen by many as the primary benefit.
We discussed some weeks ago about the intention for around half of BTL landlords to increase their portfolios with some studies suggesting that the average buyer in this category could purchase two additional properties with some planning on adding as many as three to their portfolio. These findings just further add to the idea that a limited company setup is an optimal solution.
To put it simply, using a limited company can greatly reduce your tax bill even though the amount of tax relief available to landlords has been significantly slashed over the last few months. If you use a limited company then you can potentially offset up to 100% of any interest charges. However, it’s not a one-size-fits-all approach and the tax savings will depend on your current circumstances.
A whopping 74% of those with bigger portfolios have argued that recent changes have made it much more challenging to secure buy-to-let finance highlighting the growing demand for specialist brokers and lenders. If you are a landlord who is right on the threshold of these changes then now is the time to speak to a specialist such as ourselves.
Running a Ltd company can require more in terms of time investment and money and there is also the necessity to produce detailed accounts. This can lead to additional fees for the advice that you receive from lawyers, accountants and potentially even auditors which can naturally gnaw away at your profits which is why a specialist broker such as ourselves may be able to help.
While setting up a limited company may be the solution for many we would always argue that is worth speaking to an expert before you go down this route. We can look at your portfolio as a whole and find an optimal solution that will benefit you and only you. Get in touch today and we can ensure that your portfolio continues to grow in the most cost-efficient manner possible!