Less Than 10% of Landlords Now Choose to Invest as an Individual

Key Findings: 

• Less than one in ten landlords (9.7%) choose to invest as an individual
• Two in five (42%) already invest through a limited company
• Half (48%) plan to invest through a limited company or are interested but don’t know how
• Four in five (80%) think the UK property market will see modest to strong growth in the next five years

It seems like the Government’s plan to professionalise the Buy-to-Let sector is working. According to our research, less than one in ten (9.7%) UK private landlords now actively choose to invest in property as an individual.

Instead, our data suggests that 42% of residential landlords now invest through a limited company, and just under half (48%) are either planning to or are interested but don’t know how.

The same research found that 53% believe the UK property market will be stronger in 18 months’ time, while 80% believe the market will be stronger in five year’s time. Of these respondents, more than a quarter (26%) agree that UK house prices will achieve more than 15% growth over the next five years, proving the continued confidence and resilience within the sector.

This comes after numerous changes to the tax relief system imposed on Buy-to-Let landlords over recent years, which has seen an exodus of so-called ‘accidental landlords’ who are no longer able to make the figures add up to a perceived profitable investment.

Andy Foote, director at SevenCapital, commented: “These figures really highlight just how much has changed in terms of how property investors choose to buy and operate in the UK property market these days.

“Of course, investing as an individual will remain the right path to go down for some people, as investing is very circumstantial – whatever type of investment you choose. However more and more we’re seeing investors choosing to buy through a limited company or expressing an interest in how to go about it, which is certainly the case now at SevenCapital.

“Depending on your objectives and your personal situation, buying through a limited company offers many benefits, including making your investment more tax efficient, as well as shielding you from some personal liability which can help to protect your other assets.

“What we as a sector need to do now is make sure that the new buy to let rules and ways to invest are fully understood by everyone within the sector, enabling investors to make informed and correct decisions for their circumstances. I think we have a duty to educate on all areas, including the pros and cons of investing through a limited company and the process for setting one up.”

He added: “It’s encouraging to see that positivity remains within the market over the long-term, regardless of the current pandemic – another sign perhaps of the increasing maturity of the sector, with long-term views and a sound understanding of the workings and cyclical patterns of the UK’s property market.”

With the concept of incorporation offering so much flexibility and benefits for long-term investors, it’s no surprise that more people are turning to the strategy to scale their own investments efficiently.

SevenCapital polled its own database of property investors and landlords with a total of 300 respondents providing the results.

SevenCapital does not advise on financial matters, always seek advice from an approved tax or finance professional.