Limited company landlords target higher yields despite rising costs

Limited company landlords are pressing ahead with expansion plans as most are expecting stronger yields over the next year, even as borrowing and compliance costs rise.

The latest BTL Barometer from Kensington Mortgages shows 84% of residential limited company landlords expect yields to increase within 12 months.

A further 89% say they are confident about the outlook, while 80% anticipate demand to grow and 77% expect property prices to rise.

However, worries over rising costs are widespread, with 77% expecting mortgage costs to increase.

Also, 81% report higher running costs over the past year, including repairs, insurance, utilities and maintenance.

At the same time, 79% believe regulation will become more challenging.

Limited company landlords

The lender’s chief executive, Allison Buckley, said: “Despite experiencing higher operating expenses and anticipating increased mortgage costs and greater regulatory complexity ahead, landlords remain firmly committed to the sector – underpinned by strong tenant demand and expectations of improving yields.

“What’s particularly notable is that confidence is not translating into complacency.”

She added: “Many landlords are actively reviewing and diversifying their portfolios, with growing interest in corporate lets and larger HMOs, demonstrating a clear focus on long-term income and adaptability.

“The limited company structure continues to play a central role in this evolution, with yields marginally higher on company-held portfolios compared to personal holdings.”

Rising mortgage costs

Interest rates are identified as the main factor shaping landlord sentiment, highlighted by 31% of landlords.

Regulation follows at 26%, with property prices and tenant demand both at 25%.

The wider economic outlook and mortgage availability are each noted by 22%, and taxation by 20%.

When asked about portfolios, over half (53%), plan to maintain current holdings, while 38% intend to expand.

A smaller group (8%) are considering reductions.

Access to finance remains available, with 74% saying they find it easy to secure buy to let mortgages.

Company held properties

Holding structures continue to favour incorporation and 53% expect to keep their entire portfolio within a limited company.

Those operating across both structures report average gross yields of 5.04% on company-held properties compared with 4.88% on personally owned homes.

Family housing remains the most common asset class, held by 40% of landlords.

Larger HMOs with six or more bedrooms account for 35%, while single-tenant residential properties sit at 33%.

Smaller HMOs are held by 27%, with holiday lets at 16% and student accommodation at 12%.

A conversation worth having?

If you are weighing up your own strategy, whether that’s to sell, expand, or restructure to improve profitibility, it is worth having a discussion with a Property118 consultant to take a closer look at how your portfolio is structured as a whole now, and to forecast the outcomes based on multiple scenario’s.

These conversations are typically most useful for landlords with established portfolios and relatively modest borrowing who are beginning to reflect on how their assets could work more effectively in the years ahead.