Portfolio landlords eye capital raising to fund 2024 expansion plans

Nearly four in 10 portfolio landlords, those with four or more properties, plan to increase the size of their portfolios in 2024, Paragon Bank says.

The majority of them will fund the purchases by releasing equity from other properties in their portfolio or using existing capital – 55 and 58 per cent respectively.

The findings are included in Paragon’s new Portfolio Landlord Report 2024.

The survey, which polled nearly 400 four-plus property landlords across the UK, found that 69 per cent of those adding property are doing so as part of a portfolio expansion strategy, 60 per cent are driven by long-term demand for rental property, and 50 per cent are doing so as part of their retirement plan.

The survey also showed that 61 per cent of landlords will buy with a mortgage and 39 per cent will buy outright, and that 52 per cent of landlords prefer to purchase terraced homes, 46 per cent semi-detached homes and 26 per cent individual flats.

Overall, 36 per cent of portfolio landlords said they would maintain portfolios at current levels, with a fifth looking to reduce the size of their portfolio.

Richard Rowntree, managing director of mortgages at Paragon Bank, says: "Portfolio landlords are optimistic about the future of the buy-to-let market and are looking to take advantage of the opportunities that arise in 2024. One of the ways they can do this is by remortgaging their existing properties, mortgaged or unencumbered, and releasing equity to fund new purchases. This can help them diversify their portfolios, increase their rental income, and secure their long-term financial goals."

The survey also reveals that portfolio landlords target properties that offer higher yields, such as houses in HMOs or properties that can be converted to HMOs. 

According to the survey, 21 per cent of portfolio landlords intend to purchase HMOs and 20 per cent properties that can be converted to HMOs. HMOs are properties that are rented out to at least three households who share facilities such as a kitchen or bathroom.

Rowntree concludes: "Portfolio landlords are experienced and savvy investors who know how to maximise their returns by targeting properties that offer higher yields. HMOs are one of the most attractive options for portfolio landlords, as they can generate more income per property and reduce the risk of void periods. However, HMOs also require more management and compliance, which is why portfolio landlords need a specialist lender who can understand their needs and provide tailored solutions."

You can download Paragon’s new Portfolio Landlord Report 2024 here.