"It's about talking to your landlords and diversifying from the traditional BTLs," says protection advisor
The changing landscape of buy-to-let investments has become a pressing topic for landlords, especially as new regulations and rising costs weigh heavily on traditional investors.
Carol Smith (pictured), a mortgage and protection advisor based in the North, says that while some regions have been more impacted than others, there’s a clear firsthand strain on buy-to-let clients.
“I would say that the market is probably not as affected as down south - in Liverpool we’ve seen that charge of £500 per property as well,” she said. The overall trend? A distinct cooling-off in landlord interest, especially among what she calls the “old accidental landlords.”
“I think the government almost wanted to get rid of what we called the old accidental landlords. And yes, that’s definitely worked.”
With regulations becoming more restrictive and costs stacking up, long-standing clients who have depended on buy-to-let as a core investment strategy are now reconsidering. Smith describes a sense of unease among her clients.
“I’ve got a lot of investors that I’ve worked with for 15, 20 years that are sitting there at the point of going, ‘I’m not sure this actually works for me anymore’,” she said. For many, changes in capital gains taxes and diminished returns are prompting landlords to ask tough questions about the future of their property investments.
What options do your BTL clients have?
The sentiment is shifting as landlords weigh their options. Smith believes some investors will pivot to other property types and investment methods to adapt to the shifting economic pressures.
Her advice? Consider alternatives like Houses in Multiple Occupation (HMOs) or multi-unit properties, which often yield better returns in the current climate.
“It’s about talking to your landlords and diversifying from the traditional buy-to-lets - looking at your HMOs and your multi-unit blocks,” she said, steering them toward investments with potentially more stable returns than traditional rental houses.
In addition, Smith finds that corporate structures can also offer benefits.
“Obviously you’ve got the limited company options as well,” she explained, highlighting that these structures may offer tax efficiencies that traditional private ownership cannot, especially for those with long-term investment plans. For Smith, understanding each client’s long-term objectives is essential in guiding them through these complex decisions.
“Tell us why you're doing this, what your plan is, what your long-term aim is, and then try and put them down the road for the current sort of legislation,” she advised.
First-time buyer boost
The first-time buyer market, meanwhile, remains buoyant, even as buy-to-let investors pull back. Smith notes that this shift has brought new opportunities, balancing the overall transaction volume.
“Volume has not taken a dip. In fact, if anything, we’re having a really good year this year,” she said, observing that first-time buyers are moving back into the market as mortgage rates have slightly eased. “They’ve been nervous... after COVID and the price spike, but they’re now starting to realise that they can move again.” And, in many ways, first-time buyers are picking up the slack, with younger clients stepping in as investor interest fades, according to Smith.
Selling off parts of their portfolios is also becoming a serious consideration for some landlords as capital gains tax looms large. Smith acknowledges this is a challenge she approaches with caution, guiding clients toward professional advice.
“We will never claim to be so,” she says on the role of mortgage brokers in tax planning. “I think the first thing we say to them is ‘these are your available options, but you need to go and seek advice from your accountant’.”
Long-term strategies
For long-term portfolio strategies, Smith takes a “holistic approach”, incorporating input from accountants and solicitors to create the most tax-efficient pathway forward.
“We can give them the best advice from property one to property 30,” she said, seeing value in offering a clear understanding of risks and rewards. Limited company buy-to-lets have increasingly been part of this conversation as well. She sees their benefits in terms of tax relief on interest rates, especially for those planning larger investments: “Limited company certainly is the way forward,” she said.
On remortgages and equity release, Smith is also proactive, engaging clients well ahead of renewal dates to avoid last-minute surprises.
“We start that conversation 12 months, six months before the deals are due,” she shared, ensuring her clients are prepared amid a changing regulatory environment. Legislative updates and shifts in energy performance standards are other factors she raises with clients regularly.
And, despite the current pressures, Smith believes the real estate market will continue to be a worthwhile venture for those with long-term horizons.
“It’s the long-term gain - and not making too many rash decisions. It goes through cycles, ” she said, advising landlords to “keep with it and get the best products you can.”
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Most Buy to Let mortgages are not regulated by the Financial Conduct Authority.
Carol Smith Mortgage Services is a trading name of Just Mortgages Direct Limited which is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.
