When it comes to property investment, structuring your portfolio effectively is crucial. One approach that offers significant advantages is holding each property in its own separate legal entity. While some investors may prefer to consolidate multiple properties under a single company for simplicity, there are compelling reasons to maintain one property per company. Let's explore these benefits in detail.
1. Enhanced Liability Protection
Using a company to hold your property investments inherently lowers the associated risks, providing a protective barrier around your personal assets and credit score. However, the protection is maximised when each property is placed in its own company.
If something goes wrong with a property, having it in a separate legal entity means the lender can only access the assets within that specific company, plus potentially your personal assets if there’s a personal guarantee. Conversely, if multiple properties are bundled in one company and an issue arises, the lender could potentially target all the assets within that company and your personal assets. Additionally, if you have mortgages on the other properties, the lender could trigger defaults across the portfolio, even if those mortgages are with different lenders. Keeping properties in separate companies mitigates these risks.
2. Greater Flexibility
Owning properties through individual companies provides unmatched flexibility. For instance, if you wish to sell 30 shares of a property to a friend, it’s straightforward if the property is in its own company. In contrast, if multiple properties are held in one company, selling shares would mean selling a portion of the entire portfolio.
This flexibility extends to inheritance planning and individual property transactions. You can decide which properties to pass on, which to keep for passive income, and which to sell for growth, all tailored to your specific goals. Achieving such precision is challenging when multiple properties are held in a single company.
3. Tax Benefits in Selling
Selling a property within a limited company structure can offer significant tax advantages. Buyers wouldn’t need to pay stamp duty land tax, and sellers benefit from lower capital gains tax. However, these benefits are harder to realise if multiple properties are housed within one company. Finding a buyer willing to purchase several properties together is less likely, making it difficult to leverage these tax efficiencies.
4. Improved Mortgage Access
When investing through a limited company, lenders typically use the property as security for the loan, basing their criteria on the property’s value and estimated rental income. With multiple properties in one company, lenders lack clarity on what is being used as security, which can restrict mortgage access and result in higher interest rates.
With one property per company, lenders have a clear understanding of the security, granting you access to more favourable mortgage rates. This transparency is essential for securing the best financing terms.
Streamlined Management with GetGround
Traditionally, maintaining multiple companies might seem costly and cumbersome, especially when it comes to accounting and tax. However, GetGround simplifies this model by offering a centralised platform where you can view and manage your entire property portfolio. The platform allows you to track profits and losses, monitor cash flow, execute share changes, and gain insights into your mortgage products and property analytics. You can also manage payments, direct debits, and standing orders for both individual companies/properties and your entire portfolio.
Conclusion
While managing multiple properties under a single company can offer cost advantages, maintaining one property per company holds significant benefits in terms of liability protection, flexibility, tax efficiency, and mortgage access. With GetGround, you can efficiently manage your portfolio, leveraging the benefits of both approaches. Make informed decisions to optimise your property investment strategy and safeguard your assets effectively.
