The PRS Trends research surveyed 203 experienced landlords.
It found that landlords with between six and 20 properties in their portfolio had increased from 35% to 39% of those surveyed, with a fall in the landlords who own 3-5 properties (from 26% to 24%) and those who own more than 50 properties (from 6% to 4%).
As a result, the average portfolio size has dropped from 13.1 to 11.6 properties.
Paragon suggested this portfolio resizing is one of a host of different strategies being adopted by landlords as they look to adjust to regulatory and tax changes in the buy-to-let market.
Landlords are also looking more keenly at the gearing of their portfolio, the study suggests, with the average portfolio gearing dropping to 32% from 35% in the last quarter.
This is sharply down from the peak of 43% in 2012 and is the lowest level seen since Paragon started tracking gearing in 2001.
In addition, the report found that a quarter of landlords had raised rents in the last three months. Landlords also reported the proportion of their rental income that they spend on mortgage costs had increased, from 26% at the end of 2017 to 30% today.
John Heron (pictured), managing director of mortgages at Paragon, said that there is now a “polarisation” beginning to emerge between small landlords and those with more substantial portfolios, and suggested this was a result of tax and regulatory changes.
He continued: “Our own experience highlights that landlords with larger portfolios need access to products that cater for landlords with more complex requirements and broader underwriting expertise, increasing the role for specialist lenders in the buy-to-let market.”
The findings echo similar research commissioned by One Savings Bank which also found landlords were looking to diversify their portfolios in the search for greater yield and to combat rising mortgage and tax costs.