Buy To Let now so restricted by law, investors must try something new

One of the country’s leading property management experts says buy to let is here to stay - but only if individual investors consider adopting new structures for their activities and look at markets where returns can be optimised.

David Alexander, who runs the property management business Apropos by DJ Alexander - says the old buy to let model no longer works. 

He says the need for change if clear because the number of BTL mortgages in arrears of 2.5 per cent or more of the outstanding balance rose five per cent just in the second quarter of 2019.

Those facing more significant arrears increased 12 per cent in the year to mid-2019. and the number of BTL mortgaged properties taken into possession rose two per cent year on year. 

In addition, the number of buy to let mortgages is down 42 per cent between 2015 to 2018 and remortgages are up dramatically.

“Recent legislative and financial changes in the buy to let market have introduced a more stringent and restrictive regime which can, if there isn’t an appropriate response, make it more difficult for landlords and investors to make money” he warns. 

“With fewer property purchases landlords are concentrating on their existing portfolio and trying to adjust their finances to improve the yield. The result is that the savvier landlords are cutting costs and changing the way they operate.”

He continues: “Many landlords see incorporation as the way forward allowing finance costs to be set against rent before the deduction of tax. [Mortgage trade body] UK Finance suggests that “over half of landlords intend to purchase their next rental property within a limited company structure. For landlords with more than 11 properties, this is even higher at 69 per cent.”

He says another key option is for investment portfolios to look at different parts of the country. 

“Yields in certain areas - Nottingham, Manchester and Liverpool for good yields, and the North West for good capital growth for example - are much higher so investing in high yield, lower cost areas improves income.”