'New breed' of professional landlords reshaping BTL market are key opportunity for brokers – Michaelides

For mortgage brokers, understanding these shifts is critical to staying relevant and delivering tailored solutions to clients.

The biggest change is that there are more professional landlords – those with more than three properties in their portfolios. The days of the “accidental landlord” with a single rental property are fading. Professional landlords have become the dominant force in the space.

Property investors are increasingly operating through limited company structures, too, in a bid to optimise tax efficiency. This shift is driven by developments such as the 2015 reduction in mortgage interest tax relief.

And modern landlords have become more strategic, often diversifying their portfolios to mitigate risk. Look at the growth in holiday lets. Molo has seen its own 2024 holiday let business grow over 2.5 times as a proportion of our overall business year-on-year.

Sponsored

How to get your first-time buyer clients mortgage ready

Sponsored by Halifax Intermediaries

The changing face of BTL

The pursuit of higher yields is pushing landlords toward complex BTL deals. More of their investments are in houses in multiple occupation (HMOs) and multi-unit freehold blocks (MUFBs). HMOs, defined as properties with three or more unrelated tenants sharing facilities, can yield much more than vanilla BTL properties. MUFBs, consisting of multiple self-contained units under one freehold, can offer more attractive yields still. Molo has seen its HMO and MUFB business grow over 1.5 times as a proportion of our overall business year-on-year.

However, this complexity comes with its own set of challenges. HMO and MUFB investments often require higher deposits, stricter licensing, and specialist lenders. Brokers must stay informed about these evolving products to guide clients through the regulations and the administrative burden.

Professional landlords are also undertaking bigger projects. Fewer two-bedroom flats; more large renovations – property investors are scaling up. Some are reconfiguring MUFBs, others are adding extensions or converting lofts to increase rental units. Landlords are converting family homes into HMOs.

Mortgage brokers sit at the heart of this transformation. For the UK’s BTL intermediaries, the changing face of BTL means a different client base with new, more sophisticated needs. Brokers who can hold their clients’ hands as they navigate complex lending criteria and limited company mortgages will reap the rewards. They just have to adapt to meet the demands of this dynamic market.

Of course, the complexity of these investments means even professional landlords are having to rely more heavily on brokers for guidance. The shift allows brokers to shine in their role as a trusted adviser in a way that was not possible when introducers were just churning out vanilla BTL deals.

So, the shifting sands of BTL are not necessarily a threat. Complex projects represent opportunities to offer creative financing solutions. Molo is expanding criteria, allowing up to 15 bedrooms in HMOs, beyond traditional bedroom caps. Brokers who can connect clients with these flexible products will be invaluable, especially as landlords navigate the Renters’ Rights Bill and upcoming Energy Performance Certificate (EPC) regulations, which may require upgrades to meet energy-efficiency standards. Brokers who can source competitive rates and products tailored to portfolio landlords will build stronger relationships and secure repeat business.

By understanding the nuances of portfolio landlords, complex BTL properties, and large-scale projects, brokers can deliver solutions that align with their clients’ ambitions. As the BTL market evolves, those who adapt will not only retain clients but also attract a new generation of savvy investors looking to capitalise on the UK’s robust rental demand. Embracing this shift is not just good business – it’s essential for staying relevant in a dynamic industry.