In September 2023, an experienced property investor with a portfolio of 21 properties approached us about transitioning their portfolio from personal ownership to a limited company structure. This change was recommended to them by their accountant.
The portfolio was made up of three different property types:
- Five Houses of Multiple Occupancy (HMOs);
- Seven Buy-to-Let (BTL) single residential properties;
- A semi-commercial property featuring ground floor retail premises with nine self-contained flats.
The investor’s accountant advised them to incorporate their properties into a limited company. Incorporating a portfolio in this way is a complex process. It requires the investor to both meet the HMRC requirements and a lender’s rules for them to be able to refinance their portfolio.
Under HMRC regulations, the investor had to have been operating their portfolio as a property business for at least two years before incorporating it and transferring those properties to the limited company. This means both directly managing the properties themselves and filing the correct tax paperwork, including yearly accounts.
We helped the investor secure three separate financing agreements tailored to each property type (HMO, BTL, and semi-commercial). In this instance, they could use the same lender for all three loans.
The process involved various steps, including valuations, legal preparations, and ensuring compliance with lender requirements. Importantly, the three loans for all properties had to complete on the same day to facilitate simultaneous drawdown.
After a meticulous six-month process, the transition was finalised in February 2024. The investor now operates their property portfolio as a limited company.
Transitioning to a limited company structure is not a decision to take lightly and should be done only after careful consideration and consultation with your accountant. However, for many experienced landlords like our client, this move represents a significant step towards professionalising their property management practices and optimising their investment strategy.