Professional landlords are increasingly concentrating investment in markets closer to home as local knowledge becomes a bigger part of portfolio strategy, according to Redwood Bank.
Analysis of landlord investment patterns between 2021 and 2026 shows an increase in investors buying within their own regions, despite higher borrowing costs and growing regulatory pressures.
The biggest shift has been recorded in the East Midlands, where the proportion of investors buying locally has increased by 15.1 percentage points over the five-year period.
The South West follows with a 14.2 percentage point increase, although Welsh landlords buck the trend with local investment falling by 9.4 percentage points as more look across the border towards the South West.
LOCAL KNOWLEDGE
Redwood says experienced landlords are increasingly considering operational efficiency and knowledge of individual markets alongside headline rental yields.
That includes understanding local tenant demand, rents, planning requirements and licensing regimes, as well as having established relationships with agents, tradespeople and property managers.
The trend could be particularly relevant for HMO investors because licensing requirements can vary between local authorities.
Tom Worbey (main picture), Senior Product Manager at Redwood Bank, says: “The buy-to-let market has changed significantly over the past five years. Professional landlords are operating in a much more complex environment, with higher borrowing costs, greater regulation and increasing expectations around property management.
“In that environment, local knowledge has become a genuine competitive advantage. Experienced landlords understand the markets they operate in, they know what tenants are looking for, they have relationships with local agents and contractors and they’re often better placed to identify opportunities that others might miss.”
PORTFOLIO STRATEGY
Redwood says professional landlords are also increasingly operating through multiple limited companies and building portfolios spanning conventional buy-to-let, HMOs, mixed-use and commercial property.
Rather than geographically diversifying for its own sake, the bank believes investors are becoming more selective about where they deploy capital.
Worbey adds: “Professional landlords are thinking much more like business owners than they were a decade ago. They’re balancing income, long-term growth, operational efficiency and exit strategy together rather than making decisions based on yield alone. The regions they invest into are a key driver and output of this.
“Importantly, this has implications for lenders. Assessing a landlord today isn’t simply about looking at an individual property and a blanket portfolio check. It’s about understanding the borrower’s wider strategy, their experience and why a particular investment makes sense for their business. As landlord portfolios become more sophisticated, and more targeted, lending decisions need to reflect that.”
