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Landlord hotspots: where are buy-to-let investors looking to buy homes in 2020?

More than half of landlords are looking to buy terraced properties

Landlord hotspots: where are buy-to-let investors looking to buy homes in 2020?

Landlords in the Midlands are most likely to add to their portfolios this year, with terraced houses topping their wish lists. 

Research by the specialist lender Paragon found that one in four landlords in the East Midlands plan to buy a new investment property in the next 12 months, compared with just 8% in the South West of England.

Here, Which? explains where landlords are looking to invest and offers advice on finding the ideal buy-to-let property.


Where are landlords looking to invest?

Paragon’s buy-to-let survey found that just 14% of landlords in England and Wales are currently looking to expand their portfolios, with those in the Midlands most likely to buy an extra property.

Investors in the South West (8%) and Inner London (9%) were the least likely to splash out, as shown in the chart below.

What types of property are landlords looking for?

More than half of those looking to invest further said they were targeting terraced properties.

One in four, meanwhile, said they would look to buy a house in multiple occupation (HMO).

Type of property Percentage of landlords
Terraced 52%
Semi-detached 32%
Flat 26%

Are portfolio landlords more likely to invest?

Paragon’s research shows that professional landlords with larger portfolios are more likely to invest further.

Just 8% of landlords with one property are looking to invest, compared with 20% of those with 20 properties or more.

Richard Rowntree of Paragon says: ‘Portfolio landlords have adopted a number of strategies to adapt to the tax and regulatory changes of recent years.

‘We’re seeing trends such as these landlords buying stock from smaller-scale participants as they exit the market, or targeting higher-yielding properties such as HMOs.’

Size of portfolio Percentage of landlords looking to invest
1 8%
2-3 12%
4-5 15%
6-10 14%
11-19 14%
20 or more 20%

Are landlords selling up?

It might surprise you to hear that there are landlords looking to expand their portfolios rather than sell up, especially with the latest changes to mortgage interest tax relief on the way.

Indeed, a recent report by estate agency Hamptons International found that the number of landlords in Great Britain has dropped to 2.66 million, a 266,000 fall since 2017.

The exodus could be set to continue. Data from ARLA Propertymark indicates a further 230,000 UK landlords could switch to short-term lets through websites such as Airbnb.

But while it’s a difficult time to be a buy-to-let investor, there is always a need for quality properties in the rented sector, and fewer landlords mean fewer option for tenants.

This could be why some landlords are sensing an opportunity to invest. Data from UK Finance shows that 5,700 landlords took out mortgages for new properties in December, up 4% on the previous year.

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Rates dropping on buy-to-let mortgages

Paragon’s data shows nearly two-thirds of landlords plan to fund their next purchase with a buy-to-let mortgage, and the good news is that there are plenty of attractive deals available right now.

The graph below shows how the average cost of a fixed-rate buy-to-let mortgage has plummeted in the last 12 months.

To get the very best rates, you’ll generally need a deposit of 40%. Good rates are available with a 25% deposit, but deals for investors with deposits of 15-20% are significantly more expensive.

When comparing deals you should also factor in upfront fees and any early repayment charges, and consider taking advice from a whole-of-market mortgage broker.

The tables below show the best introductory rates on the market.

Best rates on two-year fixes

Loan-to-value Provider Initial rate Revert rate Fees
60% The Mortgage Works 1.19% 4.74% 2% of the advance
75% Coventry Building Society 1.59% 4.99% £1,999
80% The Mortgage Works 2.49% 5.54% 2% of the advance

Best rates on five-year fixes

Loan-to-value Provider Initial rate Revert rate Fees
60% The Mortgage Works 1.64% 4.74% 2% of the advance
75% The Mortgage Works 1.94% 5.24% £1,995
80% Loughborough Building Society 3.09% 5.34% £1,499

How to find an investment property

House prices aren’t exactly surging at the moment, so it’s even more important than ever to take the time to do your research before parting with any cash.

As a starting point, ask the following questions:

  • What’s happening in the local market? Use property portals to gauge current listings and take advice from local estate agents to find out which property types are in demand.
  • Should you buy new or second-hand?  New-build homes, in theory, mean lower maintenance bills and less work on your part. The downside, of course, is a higher initial outlay. New homes may seem an ideal longer-term investment, but think about supply and demand, and whether better deals are available on existing properties.
  • Who is looking for a property? Think about your ideal tenant. Families will want larger, unfurnished properties near the best schools, while young couples might want swanky city pads. If the property has shared accommodation, it’ll need to have a functional layout.
  • Is it within budget? The margins on property investment can be fairly narrow these days, so think carefully before investing. Do your projected rent calculations, set a budget and stick to it. You’re in a strong negotiating position as you don’t have any onward chain, so be prepared to haggle.
  • Are you making a balanced decision? Don’t select one property and buy it at any cost. View your favourite properties several times before jumping in, and think carefully before buying at property auctions, where it is possible to get carried away.

Things landlords need to know in 2020

It’s been a complicated few years for landlords, and 2020 is likely to be no exception.

In April, the final round of cuts to mortgage interest tax relief will come into force, as will changes to private residence relief and energy efficiency regulations.

It’s a lot to take in, but we’re here to help.

For an at-a-glance look at the big issues affecting investors this year, check out our story on 15 things buy-to-let landlords need to know in 2020.

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