Professional landlords are increasingly concentrating their buy-to-let investment in markets they already know, rather than diversifying across the UK, according to new analysis by Redwood Bank.
The bank's review of landlord investment patterns between 2021 and 2026 found that professional investors are becoming more regionally concentrated despite higher borrowing costs, regulatory reform and shifting tenant demand.
Redwood Bank attributed the trend to a growing emphasis on operational expertise, local market knowledge and long-term investment quality over headline yield.
The East Midlands recorded the largest shift, with a 15.1% increase in investors buying within their home region over the five-year period. The South West followed closely with a 14.2% uplift. Welsh landlords moved in the opposite direction, with local investment falling 9.4% as they extended portfolios into the neighbouring South West.
"The buy-to-let market has changed significantly over the past five years," said Tom Worbey, senior product manager at Redwood Bank. "Professional landlords are operating in a much more complex environment, with higher borrowing costs, greater regulation and increasing expectations around property management.
"In that environment, local knowledge has become a genuine competitive advantage. Experienced landlords understand the markets they operate in, they know what tenants are looking for, they have relationships with local agents and contractors, and they're often better placed to identify opportunities that others might miss."
The findings come as the private rented sector continues to professionalise. Many investors now operate through multiple limited company special purpose vehicles and hold portfolios spanning buy-to-let, HMOs, mixed-use and commercial property.
As landlord businesses have grown more sophisticated, investment decisions have become more disciplined. Rather than seeking geographic diversification for its own sake, many experienced investors are concentrating portfolios in locations where they have established knowledge of local planning and licensing requirements, tenant demand, rental values and property management networks. Redwood Bank noted this is particularly relevant for HMO investors, given licensing variation across local authorities.
Redwood Bank's analysis also suggested the trend reflects a shift in how investors approach portfolio strategy. Historically, landlords often faced a trade-off between regions offering stronger rental yields and those with better long-term capital growth prospects.
Rising rents, changing market dynamics and wider infrastructure investment have, according to the bank, created more locations capable of delivering both simultaneously, making a home-region focus more viable as a long-term strategy.
"Professional landlords are thinking much more like business owners than they were a decade ago," Worbey said. "They're balancing income, long-term growth, operational efficiency and exit strategy together rather than making decisions based on yield alone. The regions they invest into are a key driver and output of this.
"Importantly, this has implications for lenders. Assessing a landlord today isn't simply about looking at an individual property and a blanket portfolio check. It's about understanding the borrower's wider strategy, their experience and why a particular investment makes sense for their business.
"As landlord portfolios become more sophisticated, and more targeted, lending decisions need to reflect that."
