Professional landlords starting to dominate the market

Challenging market conditions, including a combination of increased tax, industry regulation and political uncertainty, seem to have caused a dip in the number of small-scale and accidental landlords in recent years.

Related topics:  Landlords
Warren Lewis
4th July 2019
To Let 690

This has coincided with a rise in the number of professional landlords with large rental property portfolios. In view of this trend, letting agents must ensure they provide a service that meets the expectations of experienced landlords, according to PayProp.

New mortgage lending has consisted mostly of complex and professional landlord business so far this year, according to the latest figures from buy-to-let (BTL) mortgage lender Paragon.

The lender reported that the proportion of 'complex' BTL completions - customers operating through corporate structures or running large portfolios - increased from 72% to 88% in the first half of 2019 compared to the same period in 2018.

It added that lending to experienced, professional landlords represented 92% of the company’s future business at the end of March.

Neil Cobbold, Chief Operating Officer of PayProp UK, suggests that the jump in ‘complex’ buy-to-let mortgages may not only be down to new landlords entering the market, but in part also to small-scale and accidental landlords moving their properties into corporate structures, to take advantage of favourable tax rates.

Meanwhile, the English Private Landlord Survey 2018 revealed that 48% of rental properties are let by landlords who own five or more properties, and that this segment comprises 17% of the survey base.

The official report found that the proportion of landlords with just one property has declined from 78% to 45% since 2010. However, it is unclear if this is due to landlords selling their properties, buying more, moving their property into a corporate structure, or a combination of all three.

The report also shows the proportion of landlords with five or more properties increased from 5% to 17%.

Neil Cobbold, Chief Operating Officer of PayProp UK, said: "Following huge changes in the lettings market over the last few years, it's perhaps no surprise to see research suggesting that the number of accidental or part-time landlords may be dwindling while professional portfolio landlords appear to be thriving.

Despite a boom in the number of tenants, letting a property has become more complex and carries an increased risk, something that may well have discouraged one-property landlords who were previously self-managing."

At the same time, it has been easier for those with a more structured business in place to absorb the market changes and tricky conditions," he says.
Impressing professional landlords should be treated as a priority

There are several things letting agencies can do to make sure they are meeting the needs and expectations of professional landlords. Most notably, they need to provide a full service which allows landlords to remain profitable.

Cobbold explains: "As the market becomes more complex, one of the key strengths letting agents need is the ability to provide valuable knowledge and guidance to landlords with large portfolios.

Not only this, they need to demonstrate why their service represents value for money and how they can keep void periods to a minimum. Furthermore, agents who use technology to provide a streamlined and efficient service can impress large-scale landlords who manage a huge number of processes each month."

Protecting landlords' money and remaining transparent is equally important if agencies want to ensure long-term business relationships with their clients.

Of course, part-time landlords remain important to a letting agency’s client base, but being ready to work with professional landlords can be hugely profitable due to the larger portfolio sizes on offer."

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