Plans to Buy Limited Liability Company Hit Highest Level in Three Years: Paragon Bank

According to the latest data from Paragon Bank, the proportion of landlords considering buying their next property to let (BTL) through a limited liability company has reached its highest level in three years.

The survey, answered by more than 700 owners and conducted by BVA BDRC, shows that BTL investors who intend to buy their next property using a limited company structure have gone from 50% in the first quarter to 62% in the second trimester.

Paragon Bank says the research highlights how the propensity to incorporate tends to increase with portfolio size.

Just under half (47%) of owners who own between one and five properties expect their next purchase to be through a limited liability company, rising to over three-quarters (78 %) among those whose portfolios include six or more BTL houses.

It also found that over the next 12 months, 14% of owners plan to purchase BTL properties.

Among those who intend to expand their portfolio, 66% said they plan to finance their next real estate investment with a BTL mortgage, following a four percentage point increase since the previous quarter.

There has also been an increase in the proportion of owners who plan to finance purchases by releasing equity from existing properties, from 17% in the first quarter to 28% in the second quarter.

Meanwhile, buying outright using previously invested funds has declined in popularity among those considering a purchase, dropping from 14% to 7% over the same period.

Richard Rowntree, Managing Director of Mortgages at Paragon Bank, says: “Since the middle of the last decade, tax burdens on buy-to-let investments have increased significantly.

“With the recent increase in overhead purchased by rising energy and maintenance costs, running a rental business has undoubtedly become more expensive. It’s no surprise to see more owners looking for ways to cut costs, with incorporation being an option for some.

“Of course, buying a rental property through a limited liability company may not be the best route for all landlords, so it’s important that we provide clients with the complete picture. to enable them to make informed decisions,” he added.

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